Budget Refom Benefits War on Terror

America is in big trouble if it intends to win the War on Terror given its current budgetary institutions.  At a time of record increases in entitlement spending and a global war, the likes of which the world has never seen previously, the U.S. simply cannot afford continued runaway budget growth, most of which is attributed to outdated and unconstitutional social programs that serve to weaken the character of their lifelong beneficiaries.

Congress must learn to prioritize.  In essence, we must establish a cooperative relation between guns and butter.  Such was the forum topic for today’s Heritage Foundation discussion on the effects of defense spending in today’s global War on Terror given the out-of-control growth in entitlements.  As any economist will tell you, the essence of economics is about tradeoffs.  For instance, what do we give up when we buy a movie ticket?  More importantly, what are the consequences of shortchanging the defense budget in return for funding unsustainable entitlement programs?  While some may argue the merits of a specific weapons program, they fail to assess the consequences faced in the absence of the said weapons program or equipment.

Heritage scholar Alison Fraser moderated the “Guns and Butter” forum, with Reagan administration economic advisers Lawrence Lindsey and James Miller discussing the budgetary needs of winning the global War on Terror.  Lindsey suggested that revenue sharply increased after the Bush tax cuts, making way for budget increases.  In regards to the increased trade deficit, Lindsey noted that when the wealth of a nation increases, higher import expenditure results; this is a fundamental principle of trade and macroeconomics.

Lindsey stressed the importance of maintaining a defense budget of at least 4% of GDP, which he argues would be sufficient for successfully executing and winning the war on terror.  Decreased defense spending will sharply hinder our efforts to defend ourselves.  While the costs of national defense are high, the alternative costs much more.

Former Reagan FTC director James Miller discussed the importance of changing the political institutions in Washington.  Miller asserts that politicians of both parties, especially the one that holds the reins of power, have depended to heavily on pork and have put too much weight and effort in to getting reelected rather than tending to the nation’s business.  While we often assume that a Republican House, Senate and White House will solve our problems, the political institutions that permeate Congress especially make this impossible.  Both Miller and Lindsey expressed support for term limits as a solution to this ever-growing problem.  

According to a 2006 report released by the Heritage Foundation, entitlement spending for Social Security, Medicaid and Medicare is slated to consume 40% of GDP by 2040.  If Congress does not undertake the needed reforms, the rapid growth in entitlement programs poses a significant threat to national security and our ability to execute the war on terror, which all fair-minded politicians conclude will be a long-term effort.  Already the Defense Department is struggling to recuperate from drastic cuts of some $120 billion in modernization (R&D and procurement) funding enacted during the Clinton administration.  While an administration with disdain for the military is no longer a threat to its budget, the unsustainable growth of entitlement spending, which is expected to outpace economic growth in the coming years, poses a serious threat to our ability to remain a military and economic superpower.  Chinese President Jintao Hu made a subtle jeer at the U.S. when he expressed admiration for the significant economic expansion experienced in a mere 200 years by the United States.  Somehow people say I’m paranoid about China.

Reform of congressional budget institutions and priorities need to happen.  Fast.


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