There are three things (among many others) that should be included in a deficit/debt reduction plan: (1) Eliminate the obscenely unfair income ceiling on the Social Security tax, (2) subject Social Security benefits to means testing, and (3) slash the military budget to a level that bears at least some rational relationship to reality. Unfortunately, none seems to be getting much serious attention.
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First, we should change the grossly unfair Social Security tax. It is astonishingly regressive. The
current Social Security tax for most people is 4.20% on the first $106,800 of earnings and 0% on earnings above $106,800. That means:
● A person earning up to $106,800 pays 4.20% of her or his earnings in Social Security tax;
● A person earning $213,600 pays 2.10% of her or his earnings in Social Security tax;
● A person earning $320,400 pays 1.40% of her or his earnings in Social Security tax;
● A person earning $534,000 pays 0.84% of her or his earnings in Social Security tax;
● A person earning $1,068,000 pays 0.42% of her or his earnings in Social Security tax;
and so on.
In short, those who can least afford it pay the highest percentage of their earnings in Social Security tax, whereas those who can most easily afford it pay the lowest percentage of their earnings in Social Security tax. That is madness. We should simply eliminate the income ceiling on the Social Security tax; everyone should pay the full 4.20%.
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Second, we should use means testing for Social Security benefits. We issue Social Security checks to multimilionaires. That is madness piled atop madness.
Worse, we calculate Social Security benefits based on "average indexed monthly earnings". Essentially, that means that the more one earned (up to $106,800 per year), the greater one's benefits. In short, many of those who paid the highest percentage of their income in Social Security tax (those earning less than $106,800 per year) get the least Social Security benefits. That is madness squared.
The ostensible rationale for the way we handle Social Security is that Social Security is insurance (hence the acronym FICA -- Federal Insurance Contributions Act). Whatever the accuracy of that characterization may once have been has long since faded away. An insurance company has actual reserves;
i.e., actual money held for the purpose of paying claims. The Social Security Trust Fund, however, is full of Treasury Bonds. In other words, the Social Security Trust Fund is made up of IOUs for money that the government owes to itself.
In reality, Social Security is a welfare program. We should treat it as such.
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Third, we should cut the military budget by at least half. (There is an excellent an aptly titled article -- "Waste Land: The Pentagon's nearly unprecedented, wildly irrational spending binge" -- in the 2 December 2010 issue of
The New Republic. I quote from it extensively.)
The amount we spend on what is euphemistically called "national defense" has exploded and shows no signs of stopping. And I am not talking about the wars in Iraq and Afghanistan. On the contrary, "[e]ven if the costs of the conflicts in Iraq and Afghanistan are subtracted, the defense budget has swelled by 68 percent since 2001 ... in 2010 dollars."[1]
One reason for that is military entitlements. There is quite a rumpus these days about the pension benefits enjoyed by nonmilitary government workers. But consider: "Servicemembers can retire as early as age 40 and draw pensions of $20,000 per year or more -- a nice sum for someone positioned to start a new career. And officers' pensions can be spectacular. Afghanistan commander Stanley McChrystal, cashiered at age 56 for talking to
Rolling Stone, will receive an annual pension of $149,700 for life."[2] How many nonmilitary government employees have sweetheart deals like that?
Even
military types recognize that military entitlements are out of control:
“The military has generated a General Motors-style system of fringe benefits and deferred compensation” that could bankrupt the Defense Department, [retired Marine Major General and senior advisor to Secretary of Defense Robert Gates Arnold] Punaro said. Further, with 40 percent of the defense budget now being consumed by overhead — and such share expected to rise — the military’s capabilities to fight wars progressively are being drained by bureaucratic bloat, Punaro explained. Putting it in context, the Defense Department’s overhead costs of $212 billion are larger than the entire economy of Israel.
* * *
What makes even less sense is that the vast majority of those who serve in uniform do not ever receive a nickel of these hugely expensive benefits, he said. Almost 80 percent of everyone who joins the military leaves before 20 years and never collects any retirement or health benefits. The upshot is that more of the Pentagon’s money is going to fewer people who don’t necessarily need it because they work in second careers, he noted. The average American citizen probably believes that benefits are worth paying because of the sacrifice troops are making today in Iraq and Afghanistan, and may not realize that most of those troops will not receive a penny from the entitlement pot.
Another reason for the explosion of the military budget is the bloated number of military personnel:
Today, the United States has more four-star generals and admirals than during the Nixon administration, when there were twice as many active-duty enlisted personnel. This not only means expense but top-heavy chains of command in which multiple layers of brass must sign off on trivia. The ranks of senior contractor personnel are swollen, too. When Gates recently proposed to eliminate 50 flag officer slots, and cut funding for 150 senior-executive contractor positions, there was consternation at the Armed Forces Committees on the Hill, where stars and senior-grade jobs are prized political plums to be distributed.
... The United States has about 400,000 active-duty personnel stationed overseas, including around 59,000 in Germany and 33,000 in Japan. Tremendous numbers of U.S. aircraft and tanks sit, with their spare parts and crews, on other continents, along with an entire carrier strike group "forward deployed" in Japan. The United States maintains 652 military bases and similar installations in other nations, plus an ever-changing number in Iraq and Afghanistan. Housing a large force structure on other continents is far more costly than maintaining one stateside. ...
With the cold war long over, why does America need a huge troop presence in Germany, which has been a liberal democracy for 50 years? Why do we still need a huge troop presence in Japan? Forces to counter North Korea are based in South Korea and Guam; if we really think that China threatens Japan, then we shouldn't be cooperating so enthusiastically with China.
The mindset of top-heavy spending has also infiltrated the realm of counterterrorism and intelligence. For security advice, the president now has a secretary of defense, a secretary of state, a director of national intelligence, a national security adviser, a Central Intelligence Agency, a National Security Council, a President's Intelligence Advisory Board, a National Security Agency, a Defense Intelligence Agency, separate Air Force, Navy, Marine, Army, and even Coast Guard intelligence commands, a National Counterterrorism Center, an FBI Directorate of Intelligence, a State Department Bureau of Intelligence and Research, a National Reconnaissance Office, and a National Geospatial-Intelligence Agency. Even the Treasury Department has an Office of Terrorism and Financial Intelligence.
The specter of terrorism obviously required an improvement in intelligence. But spending for the sake of spending doesn't make the nation any safer, while multiple overlapping bureaucracies may only slow reaction time.[3]
Another reason for the explosion of the military budget is that we insist on having far more military power than we realistically need:
The Air Force is already stronger than all other air forces, with more advanced fighters and bombers than the rest of the world combined. Gates has estimated that, a decade from now, the United States will possess 20 times as many advanced fighter aircraft as China. Yet the Pentagon is seeking funding for thousands of additional fighters. The Navy has eleven carrier strike groups -- each a large nuclear aircraft carrier typically accompanied by guided-missile cruisers and destroyers, plus two nuclear submarines unseen beneath. These strike groups are so powerful that no other nation's warships could draw within firing distance without being sunk. No other nation will try, because while the United States has eleven nuclear supercarriers, the rest of the world has none.
... There hasn't been a significant naval engagement anywhere since 1982, during the Falklands War. Washington's naval dominance is good for everyone, as liberal international trade is made possible by the American insistence, dating back to Woodrow Wilson, that sea transit be safe and open to any nation. Still, the United States hardly needs eleven carrier strike groups to maintain its edge. Half as many would represent incontestable naval might. Despite this, the Navy wants to expand the U.S. fleet by another 50 ships in the next five years. After all, it gets roughly 30 percent of the military budget and has to spend the money on something.[4]
And, of course, there is the Pentagon's legendary record of procurement screwups.
Exhibit A for this phenomenon is the F-22 fighter jet. Lockheed Martin was chosen as the prime contractor in 1991. But the plane did not become operational for 14 years, as lawmakers scrapped over which congressional districts would receive the subcontracts. While deadlines kept passing, taxpayers paid billions. Through the years of wheel-spinning, F-22 costs more than doubled in inflation-adjusted terms per plane. ...
Eventually, the original justification for the F-22 fighter -- anticipated duels above Europe against the Soviet Union's best -- faded away, as did the adversary. When the first operational F-22 finally entered an Air Force squadron in 2005, it was unclear what the plane would do, other than be something really cool for members of Congress to have their pictures taken next to. The F-22 has never been used in Iraq or Afghanistan: Either the plane is irrelevant to low-intensity war, of the Air Force fears one will get shot down by some cheap, old-fashioned weapon. The project was finally ended last year, but only after a nasty and protracted fight in Congress.[5]
The next big jet fighter project is the F-35, which was sold to the Clinton White House as an affordable alternative to the F-22. Already, the F-35's sticker price has grown from $65 million per plane, forecast about a decade ago, to $158 million. The F-35 was also supposed to save money because it would be used by the Air Force, Navy, and Marines. However, the Marines wanted their F-35s capable of taking off vertically, so that they can be resupplied on beachheads. Adding the necessary features made the fighter more complex and expensive -- though the Air Force and Navy don't expect to use the F-35 as a "jump jet" and the Marines may not either, except at air shows.[6]
In 2003, the Defense Department decided to replace the Marine One helicopters that ferry the president, as several of the presidential helicopters are based on a design from the 1960s. First, the Pentagon chose a way-too-complex consortium of AugustaWestland, Lockhheed Martin, and Bell. Connecticut-based Sikorsky cried bloody murder and got the deal blocked. After Obama took office, he theatrically cancelled the project.
But last winter, the initiative came back. "Cancelled" Pentagon projects are more enduring than brooding teenage vampires. Lockheed Martin, a lobbying powerhouse, switched sides and joined Sikorsky to offer a different aircraft, while Boeing purchased the rights to the AugustaWestland design that once appeared to win the contract. The two sides are now at each other's throats on Capitol Hill. Meanwhile, the price of a new Marine One fleet has shot up from $6 billion just a few years ago to $11 billion. (Projects "cancelled" because they're too costly invariably become even more expensive after being revived.) The Pentagon now says the new presidential aircraft will not be airborne until sometime between 2017 and 2023. Twenty years just to build a helicopter.[7]
Those are only a few of the many, many examples. The upshot of it all is that "[ i]n 2009, the Government Accountability Office estimated that Pentagon weapons projects were collectively
$296 billion over budget.[8]
Of course, the Pentagon does not bear all of the blame for this mess. Members of Congress and State governors love military projects, because they are huge sources of pork-barrel spending for their districts and States:
On Capitol Hill, lawmakers whose states or districts contain military installations or defense contractors have a gentlemen's agreement not to attack each other's lpie slice: The contractors for mega-projects like the F-35 carefully distribute construction throughout almost every state. The result of this unwritten congressional rule -- I won't challenge your boondoggle if you won't challenge mine -- is that spending for any one military or security category can rise only if all such expenditures rise.
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In August, Gates proposed the elimination of the Joint Forces Command, based in Norfolk, Virginia. The Joint Forces Command is one of the Pentagon's ten "unified combatant commands" -- chances are we will be okay with nine. Opposition to Gates's plan was immediate and intense. Virginia's governor created a Monty Python-style Commission on Military and National Security Facilities, whose purpose is to demand that spending rise eternally. Like many parts of the Defense Department, the Joint Forces Command is a cookie jar for politicians. With no fiscal discipline observed in any other aspect of government, why should Virginia's special deal be disrupted?[9]
What we should be doing is asking sensible questions and demanding responsible answers.
Yet these questions go unasked, because they are in no one's interest in institutional Washington. Congress wants to spend money; the Defense Department and its sister organizations in intelligence want to command money; contractors want to receive money. Figuring out cost-effective alternatives is practically unpatriotic.
... This year, the United States will spend about $315 billion more on defense and security than it did ten years ago, which equates to about 2 percent of GDP. Subtract over $300 billion annually from federal spending and the national debt becomes much less dire. And when Washington spends recklessly on overpriced weapons systems or unnecessary bureaucracy, the loss isn't limited to entries on a ledger. That's money that can't be invested in preserving the vitality of America that the military is meant to protect.[10]
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Fixing this fiasco will require political will. And there is precious little of that. Besides the pork-barrel problem, there is widespread ignorance. I am confident, for example, that most Americans do not know that just the amount by which Pentagon weapons projects are
over budget is about 40% of what we spend annually on Social Security or that most of the troops risking their lives in Iraq and Afghanistan will get nothing out of the military's lavish entitlements scheme.
And there is the fundamental issue of priorities. Ordinary Americans' standard of living should be a far higher priority than lining the pockets of military contractors and stationing U.S. troops all around the world in places where their presence serves no useful purpose. And to ordinary Americans, I am sure that it is.
But ordinary Americans are not running the show. And the people who are running the show want to keep it that way. Too bad for the rest of us.
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1. Gregg Easterbrook, “Waste Land,” in
The New Republic (2 December 2010) at p. 20.
2. Gregg Easterbrook, “Waste Land,” in
The New Republic (2 December 2010) at p. 20.
3. Gregg Easterbrook, “Waste Land,” in
The New Republic (2 December 2010) at p. 23.
4. Gregg Easterbrook, “Waste Land,” in
The New Republic (2 December 2010) at p. 22.
5. Gregg Easterbrook, “Waste Land,” in
The New Republic (2 December 2010) at p. 21.
6. Gregg Easterbrook, “Waste Land,” in
The New Republic (2 December 2010) at p.22.
7. Gregg Easterbrook, “Waste Land,” in
The New Republic (2 December 2010) at p. 21 (italics in original).
8. Gregg Easterbrook, “Waste Land,” in
The New Republic (2 December 2010) at p. 21 (emphasis added).
9. Gregg Easterbrook, “Waste Land,” in
The New Republic (2 December 2010) at p. 22 (italics in original).
10. Gregg Easterbrook, “Waste Land,” in
The New Republic (2 December 2010) at p. 23.
Reason is valuable only when it performs against the wordless physical background of the universe.
