The Budget Deficit: The Elephant In The Room

With all the talk of slashing entitlement programs to bring the federal budget deficit down, a key solution is being overlooked.

By CSRwire Contributing Writer Francesca Rheannon

If we are to save our children from budget bankruptcy we're going to just have to bite the bullet and rein in those bloated entitlement programs like Medicare and Social Security. Right? While we are at it let’s raise the retirement age, slash benefits and get those selfish seniors to think about their grandchildren's future for once.

Actually, slashing social entitlement benefits might not even be enough. The real problem is that Granny is living too long, according to Andrew Biggs. He wrote on the American Enterprise Institute's blog that rising health care costs aren’t the real source of the looming budget deficit; longevity is. (He leaves the solution to that problem hanging.)

Sarcasm aside, the deficit problem is real. The U.S. government's tax revenue accounts for about 17 % of GDP – in normal economic times. (It's less now.) On the other side of the balance sheet, Social Security is 5% of GDP and Medicare another 5%. Paying our mostly foreign creditors back takes another 2% and almost certainly will rise.

But while the mediasphere bewails the cost of "entitlement" programs – the adjective itself implies selfishness – it almost universally fails to mention the camo-clad elephant in the room: the bloated U.S. military budget. The biggest single bite out of federal revenues is taken by military expenditures – almost 7%, if you add in the cost of U.S. wars and related activities to the regular budget appropriations. And it's rising some 25% under President Barack Obama.

Do we need such a huge military budget to protect our national security? To answer that question fully would take a lot more ink than I can expend here. But let's start down the road just a little by thinking about the opportunity costs. While the military budget is off the table, a broad range of "discretionary" programs are led to the chopping block. In a recent article in Time, Columbia University's Jeffrey Sachs listed the programs that are underfunded now (while the demand for some is soaring) and threatened with further cuts in the future:

…homeland security, unemployment compensation, job training, support for state and local governments, federal higher-education outlays, satellites and manned space missions, the National Science Foundation, the National Institutes of Health, the National Oceanic and Atmospheric Administration, community development, food stamps, low-cost housing, roads, bridges, environmental protection and conservation, emergency relief and reconstruction (like in New Orleans), the judicial and penal systems, international diplomacy and poverty reduction, renewable energy.

These programs may be discretionary, but they are essential to our security as a nation, not to speak of our survival. As Sachs writes, "They are core public services needed for an efficient and fair economy."

Let's take just one example from renewable energy. The cost of one U.S. soldier in Afghanistan is about $1 million per year. That could fund twenty good green jobs here at home at a salary level of $50,000. And it is indisputable that there would be more money available for renewable energy and efficiency programs if our military budget shrank, especially while the revenue pie is shrinking due to the economic downturn.

Some point to a "greening" military as an engine of innovation for the clean tech economy. $3.8 billion in U.S. stimulus money went to improving the environmental footprint of the U.S. military. But, aside from the huge environmental impact of war, far more money in the military budget is going to protect U.S. access to foreign fossil fuels. According to the National Priorities Project, some 18.8% of the Department of Defense's $516.9 billion budget obligations in 2008, according to one report. And in Obama's 2010 budget, the DoD will be allowed to spend $100 billion to maintain our nation's petroleum habit. We could put that $100 billion to building a renewable energy economy instead.

But won't military spending help us get out of our economic slump? Not really. Back in FDR's day, the modern manufacturing sector was built practically from the ground up by war production. Today, marginal increases in military spending are far less stimulatory than domestic government spending. Most of the purchases take place abroad and the spending is more technology than labor intensive (notwithstanding the huge payouts to private military contractors standing in for U.S. soldiers).

Military spending just doesn't give the same bang for the buck as domestic spending, where workers here at home spend wages on U.S. businesses. Many of those are small businesses – the main engines of employment. The federal dollar spent here at home leads to a lot more dollars in the economy. It's the multiplier effect.

Healthcare (give a cheer for Medicare!) is a real champ when it comes to the multiplier effect. It creates jobs here, boosts demand for a myriad of feeder industries, and, if it were made affordable and universally available (like Medicare is for seniors), would lead to a healthier population with more disposable income. For one, there'd be fewer bankruptcies for medical reasons.

And, speaking of health, spending on environmental health, like clean-up, clean energy and energy efficiency instead of military adventures abroad, wouldn't just provide good domestic jobs now and make America competitive abroad in the race to a clean energy future. It would also help raise the business and wages tax revenues to pay for entitlement programs, rescue our grandchildren from debt – and insure they have a liveable planet to enjoy their retirement.