Sequestration

Will Sequestration Cause the Sky to Fall (Defense Edition)? Not even close.

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Reason columnist and Mercatus Center analyst Veronique de Rugy has a sharp post up at National Review's The Corner. Despite the bipartisan pants-wetting from folks such as Democrats Leon Panetta and Barack Obama, the Heritage Foundation's James Carafano, Sens. John McCain and Lindsey Graham, and others, de Rugy says that cutting defense spending by an estimated $55 billion will neither kneecap our national security nor crush the economy.

On the first score, de Rugy notes that previous defense drawdowns typically are much starker in absolute and relative terms. That is, when the U.S. cuts defense spending after wars, spending has typically declined by about 30 percent over 10 years. Not so in this case:

The CBO projections (see Table 1.3 here, or Table 1.5 in the new CBO projections) about the impact of sequestration show that in the worst-case scenario (if all the cuts are applied to the baseline in the law), there will be initial reductions between FY 2012 and FY 2013, but that defense spending will continue to grow in nominal terms for all years after. After sequestration, the FY 2013 defense budget will be comparable to its FY 2006 level (in real terms). Adjusted for inflation, over the next ten years, the spending is projected to remain relatively constant.

And recall that total defense spending has jacked up some 70 percent in the 21st century, so we're relatively loaded for bear when it comes to military power. It's also worth noting that the U.S. currently spends something like 40 percent of the planet's spending on defense. Finally, can defense hawks answer a simple question: Is there ever a legitimate time to reduce defense spending year over year? If the answer is no, then they are simply being dogmatic that spending must always increase (or at least stay at the same level). Talk about an empty argument. 

As for the larger economy: Will cutting $55 billion out of government spending between now and the end of the fiscal year in September crush GDP? The GDP figures include most (though not all) government spending, so GDP will take a hit whenever the government turns off the spigot. But it's a major mistake to think that government spending automatically helps grow the economy; much of it is simply a waste of dollars that needs to be covered by current or future taxes (or inflation). To this point, de Rugy quotes her Mercatus/GMU colleague Tyler Cowen from his recent New York Times column:

In the short run, lower military spending would lower gross domestic product, because the workers and resources in those areas wouldn't be immediately re-employed. Still, that wouldn't mean lower living standards for ordinary Americans, because most military spending does not provide us with direct private consumption.

Read de Rugy's whole thing here.

Sequestration is a stupid, blunt weapon. It slices spending across the board without any discrimination or cost-benefit analysis. Its very reckless nature is precisely why it was used as a threat to get Congress' ass in gear to arrive at more precise and surgical cuts. It didn't happen, so now Congress is stuck with it. Or at least, let's hope so. They've already postponed it once. And if they want to offer alternatives before March 1, they can always do that by calling for specific cuts that satisfy the $85 billion or so in total cuts to this fiscal year's budget.

Despite John Boehner's insistence that House Republicans have done so, they have not. The bill he touts as doing that, H.R. 6684 or The Spending Reduction Act of 2012, doesn't actually cut spending. As Rep. Justin Amash (R-Mich.), one of 21 no votes on the measure, wrote at Facebook, "Contrary to its title, the bill increases spending and debt by tens of billions of dollars."

Indeed, H.R. 6684 not only exempts defense from any cuts, according to the CBO's scoring, it actually increases deficits in 2013 by $45 billion (see "Net Changes in Deficits" line on page 2). That's appalling, of course, but it also is one more example of how most bills do the exact opposite of their titles.

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  1. Who’s the prick in the Ohio State shirt?

  2. Yeah, we’ve just got an announcement this week of a hiring freeze, which will make it that much harder for me to get a promotion (grumble), and there is a possibility of furloughs. They are talking of 22 days of being furloughed. So basically 1 day a week for 22 weeks, although the possibility of it happening all at once is still up in the air. They haven’t announced early outs or RIFs, yet. They have said that temp positions are now terminated and term employees will not be renewed.

    Yeah, it is ridiculous, because some activities are necessary, if you want to maintain the equipment and the troops. Others are not.

    Do we need spending cuts? Absolutely. But across the board is stupid. Shut most of our overseas bases, draw down in Afghanistan, stop attacks in other areas, and look for programs that should be reduced or dismantled.

    but yeah, there was talk of sending all of DOD home for 1 month. No supplies, transportation, or anything for the troops for 1 month would be worthwhile, I’m sure.

    1. there is no pretty way of making it happen. Whatever method is put on the table will make someone unhappy.

      I keep waiting for DOD to tell countries that host installations that they can either pay for the privilege or we pack ’em up and go home. Time for other folks to cover the cost of their own defense instead of asking Bob and Betty American to do it for them.

      If you put the troops who leave along the southern border, you will see a flurry of economic development because few things spur private business investment and development quite like a permanent presence of thousands of federal employees.

      1. Yeah, I know several cities and towns that would dry up if installations were to shut down, because it is typically the biggest employer in the area.

        I agree, we should make some of those other countries pay us for their defense, especially Japan and South Korea. I would leave only a medical base and airfield in Germany.

        We certainly don’t need to start setting up shop in Africa.

  3. …de Rugy says that cutting defense spending by an estimated $55 billion will neither kneecap our national security nor crush the economy.

    I will be danged if I will take national defense advice from a lady Frenchman.

    1. Danged if you do, danged if you don’t, monsieur.

  4. I say we keep spending money. Let’s run this bitch into the ground.

    1. You might have a bright future in the U.S. Senate.

  5. As I was saying yesterday, sequestration may be blunt but it is also fair, and it’s also an “equilibrium” if you will, where competing interests in Congress can compromise.

    Once you get into the game of trading who should be cut more or less than others, then the procress breaks down into everyone defending their turf, which makes it impossible to get any spending cuts.

    Congress has never been governed by a process in which spending is determined in any “smart” way. It isn’t set up to be an intelligent process. It’s set up to be responsive to political interests and influence. If your goal is to cut spending, the only intelligent way to do it is to get those competing interests to agree on an equal share of the burden. Which is what sequestration does.

    1. I say this… cut post 2000 programs and keep spending on the rest the same until we have more revenue than spending. After that, only an inflationary adjustments and start paying down the debt.

  6. Do we need spending cuts? Absolutely. But across the board is stupid.

    But making rational cuts requires thought, and that’s expensive. All the savings will be consumed by the analysis, so we might as well just keep doing what we’ve been doing.

    “We may be lost, but we’re making good time.”

    1. The main reason for not making rational cuts is that making irrational cuts lays the groundwork for making no cuts later, or increasing spending.

      Oldest game in the book. Cities don’t threaten to close their Office of Diversity Outreach, they threaten to fire cops and firefighters. Same deal here.

      1. Yup… and grandma and grandpa will be dying in the streets if we make ANY cuts ANYWHERE in the budget.

    2. I don’t know about anyone else, but I have, myself, cut several million dollars in inventory and procurements. I’ve basically cut more than I’ll make in 30 years plus retirement.

  7. How did we win WWII? In 1939 we had like 100,000 troops, no tanks and 150 planes. Six years later we straddled the world with military machines and personnel.

    1. Based upon the fact that we now defend Germany and Japan (and a whole bunch of other countries) and ask little to nothing from them for the privilege while we spend ourselves to Greece, I’m not sure we “won” WWII.

      1. We defend them because the sight of a German or Japanese aircraft carrier sailing into New York for Fleet Day would make our dicks shrivel up in shame. Basically make Canadians out of us.

        1. My dick shriveled up in shame after Kobayashi started winning the Nathan’s Hot Dog Eating contest. Kobayashi made us his bitch.

          *attempts weak USA! USA! USA! but breaks down crying*

  8. If your goal is to cut spending, the only intelligent way to do it is to get those competing interests
    to fight to the death in a locked room.

    1. Pay per view? I’M IN!

  9. Cities don’t threaten to close their Office of Diversity Outreach, they threaten to fire cops and firefighters. Same deal here.

    One of my “favorites” to use that word in its least appropriate manner, was when Atlantic City, NJ, shut down their casino enforcement agency (a massive revenue source) because they were having a “budget crisis”. Without “supervision” the casinos were forced to suspend operations.

    Needless to say, the ransom was paid.

    1. Who run Barter Town?

      Embargo lifted….

      1. But how the world turns. One day, cock of the walk. Next, a feather duster.

        1. Ain’t we a pair

  10. Look at the F-35. Manned aircraft are going the way of horse cavalry but the defense companies want to sell one last generation of manned warplanes, the Pentagon wants one last generation of pilots. Romantic but not really a good deal now is it?

    1. I’m not totally convinced of getting rid of all manned fighters, but reducing the fleet of them is probably a good thing.

      But definitely don’t go unmanned cargo/troop transports. I’d rather the person piloting the aircraft have a stake in keeping it in the air or landing it safely.

      1. STACK OVERLOAD LINE 35:

        “AAAAAAAAAaaaaaaaaaaaaaaaaaaauuuuugh!”

        1. But there was always respect. I always knew where the line was drawn. And you just stepped over it, buddy-boy. You’ve insulted me. And you’ve insulted this company with that bastard creation of yours. I had a guaranteed military sale with ED 209. Renovation program. Spare parts for 25 years. Who cares if it worked or not?

          1. “Bitches LEAVE.”

            1. xXx reference, has to be.

    2. If you’re actually defending your country and not aggressively waging war all over the world, manned planes make all kinds of sense. Compared to F-22s or F-35s, drones are worthless if you’re being invaded by someone else’s aircraft.

      In fact, if you’re following non-aggression as a principle, then drones have no place domestically.

      1. There is supposedly a new generation of remote-controlled fighters out there that could run rings around the F-22, since they could pull G forces no human-power fighter ever could.

        I’ve read opinions both ways as to how viable unmanned fighters are.

        Unmanned bombers are undoubtedly the future–the military already has ground-attack drones.

        1. that should be “human-controlled fighter”. Needless to say, a human-powered fighter ala The Matrix isn’t going to run rings around an F-22.

        2. Technologically, the biggest problem with unmanned fighters appears to be response time. Just think of every time your cell phone connection gets buggy. Now apply that lag to the split-second decisions needed for air combat. It may be that internal programs in the fighter could control that, rather than remote control, but that brings up the issue of decision-making in a combat situation.

        3. Well, the predator drone is a dog. Top speed is 135 mph.

          And I just don’t see that the performance of the aircraft will eclipse the pilot’s ability to control, regardless of G forces. There are many other things to consider. When your vision is limited to a couple of cameras, and cameras can’t be controlled like a human eye, that’s a problem.

          And our drones are doing an awesome job in third world shit holes with no military to speak of….but that changes if you every get into a war with a well equipped enemy.

          1. Trust me, the pilot of an F-22 isn’t relying on visual contact for much of anything. That hasn’t been true in fighters for at least 40 years.

            Another factor in favor of unmanned fighter performance is that they don’t have to be designed around a human occupant. You can do a lot with plane design if you don’t have to worry about that.

            The proposed fighters in question have absolutely no relation to the reconnaissance and ground attack drones you’re thinking of. For those, high top speed is not required and would actually be a liability.

  11. I’d rather the person piloting the aircraft have a stake in keeping it in the air or landing it safely.

    Don’t be ridiculous. That guy in the comfy chair in front of the video screen with his hand on the joystick, somewhere in a windowless room in the Nevada desert, will feel terrible if he rams you into the side of some Pakistani mountain.

  12. What’s the over/under on this year’s deficit? I see OMB has it pegged at $845MM, which strikes me as laughably low, given that we’re on a run rate for $950BB for FY 2013.

    I’d go with a nice round $1TT, but Obama is a lucky bastard, so I’ll stick with $950BB.

    1. Always go with the over. You know how this works.

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