Cuts in government spending from the “sequester” may start to kick in on March 1st.These cuts will force the U.S. to sharply reduce military and entitlement spending.
Cutting such spending sharply is a terrible idea, for several reasons.
First, sharply cutting military spending might suddenly weaken our position in several key areas of the world. Gradually reducing our commitments makes sense, but doing it suddenly does not.
Second, and even more important, cutting spending like this will hammer the economy, just the way the sharp cut in military spending in Q4 hammered the economy at the end of last year.
The private sector will not immediately replace this government spending (sorry–the “confidence fairy” was a myth), so the unemployment rate will likely rise and consumer and business spending drop, thus hurting the rest of the economy.
In short, although the Republicans used to have a legitimate claim to being the party that was smarter about the economy, the GOP’s advocacy of sharp spending cuts to curtail what the party continually describes as “runaway government spending” is, sadly, economic idiocy.
As George Soros, Paul Krugman, Joe Weisenthal and many others have argued for the past several years, the only way out of our current economic malaise and debt and deficit problem is growth.
And slashing spending sharply because, well–because something bad might happen someday if we don’t–will make the economy and debt and deficit problem even worse than it already is. Greece, the U.K., and other countries have tried this “austerity” approach to fix their debt-and-deficit problems in recent years, and these experiments have illustrated that cutting spending to reduce deficits simply doesn’t work. On the contrary, it makes the problem worse.
We have to grow our way out of our debt and deficit problem. There’s just no other way out.
If we are going to cut spending, military spending is a perfectly good place to start.
Because we spend an astronomical amount on our military.
U.S. military spending has soared over the past decade, and we now spend $700+ billion a year on our military (see chart at top). This dwarfs the military spending of any other country on the planet.
Photo: SIPRI, Wikipedia
The No. 2 military spender in the world, China, spends about $140 billion a year on its military–less than a quarter as much. (See chart at right).Our military spending is so huge, in fact, that it accounts for a staggering 41% of all the military spending in the world.
That’s more than the next 15 biggest military spenders put together. (See chart below,)
The only military spending category in which the U.S. isn’t absurdly dominant is military spending as a per cent of GDP. Our economy is so huge that our level of military spending as a per cent of the economy–~5%–is behind that of several other countries. Importantly, however, these other countries are small countries with small economies. No other developed or big country comes close to us in military spending, even as a per cent of GDP.
Photo: SIPRI, Wikipedia
So suggesting that we can’t cut military spending without rendering ourselves a weakling relative to the competition is absurd.Of course we can.
But those who suggest it would be disastrous to cut this spending all in one go, this year, are correct: As previously suggested, it would hammer the economy.
So we shouldn’t do that.
And, in fact, we shouldn’t even “cut” this spending over the next several years. Rather, we should re-allocate it.
Specifically, instead of just “cutting military spending,” we should gradually shift some of this spending to domestic infrastructure spending.
For years now, as government budgets have gotten tight, we have scrimped on national infrastructure spending. And it shows. On an infrastructure level, the U.S. has become an embarrassment relative to the rest of the world.Gradually shifting a couple hundred billion dollars a year out of military spending and re-allocating it to domestic infrastructure spending would not harm the economy–because we would still be spending this money.
It wouldn’t reduce employment or harm business or consumer income or spending.
And, importantly, it would allow us to start to address the sad state of our domestic infrastructure, which, by some estimates, needs about $3 trillion of spending just to become safe and state-of-the-art again.
So, yes, we should cut military spending.
But we should cut it gradually.
We should cut it gradually enough that we don’t suddenly screw ourselves in areas of the world in which our military spending is performing a critical function.
And we should cut military spending by re-allocating it, so the overall level of government spending on things like equipment and infrastructure doesn’t drop.
We should cut our military spending because, as much as we want a “strong defence, we certainly don’t need to spend $700+ billion a year on our military when the next-biggest spender on the planet spends only ~$140 billion a year.
Meanwhile, we do need to spend more to bring our national infrastructure into the 21st Century.
And we certainly don’t want to just slash government spending, because that will just make the employment and debt-and-deficit problems worse.
So the answer is a gradual shift… Take some of the vast amount of money we’re currently spending on our military and gradually invest in in shoring up our domestic infrastructure. We can do this with a couple hundred billion dollars a year and still have the most powerful and biggest military on the planet by a factor of two or three. Instead of using this spending to police the rest of the world, we can use it to improve our experience at home. And we can reduce our military expenditures without demolishing our economy in the process.
It’s a win-win all around.
Military spending by country… Guess who wins:
Photo: SIPRI, Wikipedia