A lot of newspaper talk revolves around the cost of the wars in Iraq, Afghanistan and in Libya. Congress wants to cut military spending so they can keep the social programs of entitlements running at full bore.
There are two things to look at here. The billions we are spending on the wars are not being spent in those countries, but rather in the US. We build weapons and tanks for deployment by the military. Secondly there is an obsolescence factor for many weapons. The Napalm produced for the Vietnam War is still hanging around leaking, presenting a nightmare disposal problem. I’d hazard a guess that the missiles we fired on Libya had a “use by date” that had expired (this eliminates a potential disposal problem and justifies the reordering of replacement weapons).
The Kennedy moon program was on par with military spending, the money was spent on research and production in the private sector and it stimulated the economy. Critics often point to the space craft on the moon being worth 2 billion dollars. Not quite, it took two billion dollars to put them there.
Right now in simple terms, our government has three spending modes, administrative costs (running the government), two transfer payments (Social Security, Unemployment, Medicare) commonly called entitlements, and third, discretionary, spending (military, infrastructure, scientific research etc).
Administrative spending won’t be cut much, unless they cut a department or two ( offhand 9 or 10 come to mind).
Of the three types of spending, entitlements (non discretionary) are just a redistribution of wealth to people for consumption. These payments stimulate the economy the least.
Discretionary spending is where we get the biggest bang for tax dollar spent, and it’s all “optional.” A strong defense and a solid infrastructure have a definite return for the average citizen and is a necessary expense, but of course, here is where the first cuts come. In the future, we will have to tolerate bad roads and lousy government service. Funding will not be there for it. Honk your horn before you drive into a pot hole.
Military spending is an exceptional economic stimulus, but it does have one drawback, it is not for private consumption. You might want a wide screen TV, but not a Bradley Tank; it wouldn’t fit in the garage, plus it gets lousy gas mileage.
The government interest expense last year ($413 billion) is close to what we budgeted for defense ($515 billion). The current Congressional goal is to cut spending and at the same time continue borrowing. How does that work? Why not just stop borrowing? It’s a little like using a pay toilet that has no toilet paper. The solution to one problem creates another.
New technological advances don’t come from Social Security and health care entitlements. Investing in our future has to do with the youth of our country. Entitlements are benefits that should be the first things to be cut in the government budget, not the last. Congress is eyeball to eyeball with the silver foxes. What will happen to military spending and other government research? Sadly, it is all about votes. Maybe that’s why Congress and the President like to play golf, if you lose your balls, you can always buy more.
34 comments:
Couple more jobs gone from CA...
LM Space Systems to eliminate 1,200 positions
DENVER, June 14th, 2011 -- Lockheed Martin Space Systems Company, a major business area of the Lockheed Martin Corporation [NYSE: LMT], announced today employment reductions designed to address affordability and improve its competitive posture.
Space Systems, which currently employs approximately 16,000 employees in 12 states, will implement a broad-based workforce reduction of roughly 1,200 employees by year-end. It is anticipated that middle management will be reduced by 25 percent, with significantly smaller percentage impacts in other levels and disciplines.
Operations across the country will be affected, with the largest impact expected at the company’s sites in Sunnyvale, Calif., the Delaware Valley region of Pennsylvania, and Denver, Colo., where several of the company’s major programs are transitioning out of development.
Hi Tyrone
This is not good news for middle management in private industry. These are high paying jobs that are disappearing. I'll bet nobody saw this coming.
Thank you for the link.
Jim,
I speak from experience both on the military side and military government contracts dealing with budgets. I was in the military for 22 years and worked for LM for 4 years after that as an engineer.
On the military side, units get operationally funded on a yearly budget but get it in quarterly chunks from the Wing Commanders.
If you don't spend your quarterly funds,it goes back into the Wing's account for distribution to other units. All moneys must be spent at the end of the FY, or next year your budget is lowered. So basically, its a spend it or someone else will for you mentality. The military does not comprehend cutting or saving money.
On the government contract side, there is competition (and lots of it) for funds. Contracts go to the lowest bidder, thus there is some efficiency built into the system so the government gets the best quality for the lowest possible price.
Is there waste in both the military and government contracts budgets? Absolutely. I saw it on both sides. Is there room for cutting military spending? Yes.
However money that goes into the military and its programs stimulates the economy in many ways. Having a military base and government contracts in your city is a huge influx of $$$ for the local economy.
And there in lies the problem... What city official, state official, state representative or senator is going to raise their hand first to start the cutting?
With all government spending, its all about the status qua... not whats in the best interest of tax payers.
What I can tell you though, is that military programs and bases that do get the axe... are areas where senators or representatives are considered to be a "loss" to the party in the next election.
ATP
I worked for 3 years for a company who did advance development for the government. What I noticed was that the government has a bottom less wallet when it comes to defense contracts. You may start with the lowest bidder, but the bidder also knows the government keeps paying the bill when there are cost overruns. So after three years I was convinced that people underbid purposely knowing that government does not care much about cost overruns. Also, I noticed that what private companies do is not in the best interest of the customer (government - we the people) but the interest of the executives and the share holders.
I remember asking someone once ain't this ripping the government, and the answer was the others are much worse.
So I am convinced that we should be able to get more efficiency from defense contracts.
Why do we need such a big military? Why do we have to be the police force for the world? Why are we in Afghanistan, Iraq, Pakistan, Libya? (to unsettle the middle east and to maintain control of oil channels to us, even tho we have enough oil at home). Why do we tolerate the waste? We don't need much of a military to protect ourselves. Who is going to invade the USA? We have a huge military (mostly naval) so that we can control the trade lines and be imperialists.
The system doesn't work people. Government has become a business linked with other business (that is Fascism). No one is careful about spending when it isn't their money. That is our government.
We need to reduce the size of government. Take eveything out of the public sector that doesn't belong there and put it back into the private sector. Get government OUT of our businesses and personal lives. Otherwise they are going to keep growing and our budgets, deficits and debts will continue to balloon.
No more socialist welfare, no more dealing in imperialist nation building, no more fascism.
Government should just simply deal with our infrastructure, our defense, maintenance of rule of law, and a few other duties. THAT IS IT.
If we don't move in that direction this will all come crashing down.
Because military spending is like insurance spending. It may have value to the spender but it has little hedonistic value. If you took my entire cel phone budget and my entire high speed data budget and spent it on the military, I would consider myself poorer. No netflix no google on the road no email.
Chemotheraphy is valuable to a cancer patent but its value is smaller than watching movies, evidenced by the greater spending on movies.
Hi ATP
I'm in complete agreement. Military spending produces something and stimulates the economy.
I think we both realize that if we had to choose between transfer payments like welfare, Social Security etc and discretionary spending like the military and science, we get a greater return for the latter. You have to work to get a check.
Hi Anon 8:16
No argument from me. It gets even worse if there aren't any private contractors. I worked for the Highway department in Colorado for 5 years (state run). When I figured out that shovels were for leaning on, I quit. Of course private contractors do all the work now. Private competition can keep prices in line, but that doesn't work with the government run entity's. That's why Obama's health care scares the hell out of me.
Hi AIM
I don't see the size of our military really being an issue. Either we take control of the world or we can sit by while someone else does.
I was suggesting that if we have a choice, we should spend our dollars on something that gives us something in return. Transfer payments like unemployment, Social Security or Medicare, give you a check for doing nothing. This might touch a raw nerve with some claiming that they paid good money for those retirement benefits, but they are getting 10 times what they put into the system and more.
As you suggest, government needs to be downsized but I am not sure how we could accomplish it. We cut their budget, then they cut the service delivered.
The problem could solve itself if half of our institutions can't get funding, and that may come to pass. The only trouble I see, is it could take some time, like 5 to 10 years.
Thought provoking article, thanks Jim.
"All moneys must be spent at the end of the FY, or next year your budget is lowered"
Similar at DOE. Spend it all, or you lose it.
As for slashing entitlements, I'm a little worried about the crime rate if start cutting benefits.
I have a friend in the Air Force,who flew in Nam.
They were alloted a given amount of fuel,per month.
On the last day of the month, if any was fuel left, they would fly around,aimlessly, until the fuel was used up.
Granted military spending stays in the States and stimulates the economy. But at what cost? Hundreds of thousands slain, millions of lives turned into poverty and chaos, all in the quest to hunt down imaginary boogie men. Surely we can find better use of our resource's at home.
Hi Anon 12:33
I flew in Vietnam and I don't believe that there was any use it or lose it issue. We burned it as fast as they could deliver it. If you had anything "extra," you sold it to the people in town.
Hi Anon 7:44
Methinks you exaggerate too much.
40,000 people die on our highways each year.
War sucks, but there are a lot of people out there that "Want it their way," if provided the chance. Death is the only argument they understand--yours or theirs.
Social Security isn't exactly a 'transfer' payment system as for example welfare. You're being disingenuous by framing it as such.
True, the money I get deducted from my wages gets spent almost immediately by the Gov, however that's just one more injustice in a long string by a Government that's grown into a monster. No politician will speak the truth that SS funds essentially get spent in order to buy votes for their reelection
As for Military spending, cut it to the bone. The US is broke and shouldn't be in the business of confiscating income (thereby staving business investment) in order to build/maintain an Empire.
The justification for the Iraq invasion was a LIE. As was the Gulf of Tolken false flag decades earlier. There's no reason to maintain troops in Germany and Japan 70 years after WW2.
The US is Broke and the Federal Government needs to shrink in size by 2/3s.
We spend more on defense than the rest of the world combined. I can think of better uses.
Pure Science R&D Programs for Alternative Energy: Gains in the basic science of solar energy conversion, battery storage, wind, tides, etc. The private sector does not have the stomach for multi-year or basic science R&D.
Roads, Bridges, Tunnels: Why does the US love big construction projects, but dislike basic maintenance? Much of the transportation grid in the US is falling apart, in need of a massive repair. Repave everything, and turn our roads into showcases.
Electrical Grid Refurbishment: This is both an economic and national security issue: The electrical grid is an unreliable mishmash of public and private ownership, vulnerable to both blackouts and cyber-attacks. It needs to be upgraded yesterday.
Airports, Ports: Many of the older US airports are simply awful compared with European and Asian facilities — some US airports look like they are from 3rd world countries. Issue bonds, split the costs with the Airline industry, and make US airports globally competitive.
Welfare money goes back into the economy to. The only things we produce are weapons and toxic financial derivatives.
A million dead since we first intervened in Iraq, Three million displaced. Infrastructure destroyed. Their resulting civil war will start shortly. Iraq, Afganiscam, Libya...its always been about oil.
look at this cnbc poll on bernanke.
are americans actually this intelligent?
http://3.bp.blogspot.com/-KaRP0KGKsLI/TgJLxVXtpWI/AAAAAAAALpU/QO7KRqWxtIk/s1600/bernanke%2Bconfidence.png
Jim, for an avowed conservative/libertarian who is against government waste, your unqualified support for our grossly excessive military budget is certainly puzzling. Just today we learned that the cash lost in Iraq is probably closer to $18 billion than the $6 billion originally thought. See here: http://www.zerohedge.com/
And why don't you tell us why we have more troops in South Korea than we do protecting our borders and American lives? Why do we still have 50,000 in Japan 60 years after the war ended? If we had the money I wouldn't mind being "extra" safe. There is no money for "extras" anymore, Jim, or haven't you been paying attention?
I'm a Blue Dog Democrat that wants to push hard for entitlement reform so my kids have a fighting chance in this great country. But when conservatives like you won't even consider reducing military, oil and Big Ag subsidies, when you can't bear the thought of raising tax rates to only a third of what they were under Eisenhower, when you demand that corporations pay no more than 6% of the government's costs (today's rate) vs. the 60% they paid under Eisenhower, I want to puke. Indeed, if your idea of deficit reduction is a one-sided destruction of every program you don't like and the preservation of every program you do like, I'd rather see the whole system collapse in one final entitlement orgy.
Hi Goodrich4bk
The amount of military spending and the deployment of troops, I have no control over. I do believe that the size of our present military is too small to support all of the deployed troops. There aren't many troops left for homeland defense.
What I was trying to show was the stupidity of present cuts being made. Mandatory spending of 20 percent for Social Security, 23 percent for Medicare and 18 percent for interest on the debt. The 400 billion for interest on the national debt is ridiculously absurd.
As for discretionary spending we have 20 percent left for defense, and about 20 percent for everything else. And then we have to borrow another trillion dollars to balance the budget.
As for taxing big business 60 percent, go right ahead. General Motors just adds the taxes on to the price of your car. Business's pay no taxes, they pass it on to the consumer.
Big business is taxed to hell in this country and most are moving overseas where they can make a real profit. To a business, there is no difference between wages, health care, Social Security paid and income taxes. It's money they have to pay before they make a dollar.
We just had the biggest tax increase in our history with Obama care. Figure about $4,500 per worker per year. And it will be spent just like Social Security. So its a tax on young people, who by the way don't get sick very much.
You can't use the past as a measuring stick for the present. Eisenhower was a Republican, a 5 star general. We had silver money back then. A home cost 25K a car was 3K, your dad made 5K a year, your mom didn't work and the family had one car. Do you get the feeling that something has changed over the last 50 years?
We could get rid of our entire military budget and it wouldn't solve our budget problem.
So let me simplify "Military Spending Cuts-Why," to a very basic question: "Do we want to tax the hell out of the young or go after all of us old farts that are responsible the mess?"
Do you see what's going on now? It's not about me and my views, I'm just the messenger.
2:31:00 PM,
That is not cnbc, that is a blog picture. Please use a direct source?
http://www.cnbc.com/id/35012606/Poll_Should_Bernanke_be_Reappointed
Hi Anon 2:31
Thanks for the link.
I don't think we can chalk it up to intelligence. I think everyone is good at spotting a very successful used car salesman--he knows how to spend your money.
2:31's link is a question "do you have confidence in the way that Bernanke is handling the economy" and it was a resounding no
8:37's link asks the question "Should Bernanke be reappointed." 55% said yes
OK ANON 8:37 HERE IS THE LINK
http://www.cnbc.com/id/43484679
LOVE ANON 2:31
The 55% that want him reappointed are dead in the head and probably don't understand anything about what the FR is and how it impacts our economy and has been destroying it for the last 100 years.
If the population was educated on the FR they would all want Greenspans and Bernankes heads on a platter.
BTW: military is just one of many spending cuts needed to save our asses.
Hi Anon 8:58
Thank you for the compliment.
Your comment "As for slashing entitlements, I'm a little worried about the crime rate if (we) start cutting benefits." I can put your mind at ease.
Crime is pretty much a function of young people. LA last year claimed that violent crime went down 20 percent. We didn't have a drop in crime or better law enforcement, there's been a large drop in the number of young people between 15 and 30. Declining school attendance figures support it.
as far as i'm concerned it is time for a revolution, french style.
we need to clean out all the rats out of our government, reduce the size and struture of this government behemoth, abolish the fed, move off of the warfare/welfare mindset, and get back to basics, or...
we will be dead in the water and our grandchildren will be living in a country that was once the world power and is now a crippled casualty.
people think of empires collapsing as long past occurences recorded in history books. they don't understand that they are making history right now and are in collapsing empire.
Once they (the government) excise all they can from government spending modes one and two, spending mode three will be doubled to keep the recipients of cut backs in modes one and two from taking over the asylum!
They (the government) may need as much "bang for their buck" to control the great unwashed (and undernourished)! Who is your biggest small arms and riot gear manufacturer? I may put them on my short list for my share portfolio :)
"revolution, french style."
I think you posted to the wrong blog!
If you want a revolution, start at home. Stop buying Chinese products. Start growing your own food. Get out of debt. Then teach others how to do the same. That should keep you busy for a while, and keep you from making guillotines in your home workshop.
how can you have writer's block jim? this is history in the making.
we're being hammered by debt, deficits and demographics. despite all of the threats of disaster somehow i believe everything will fall into a new balance after we burn off all of these wild and crazy errors.
..
Nice post. We're kind of screwed which ever way you look at this.
Jim in SM,
The EU/single currency experiment is a failure and will probably start falling apart in the next few years.
Don't you think that when Greece and the rest of PIIGS crash and burn that the euro will be trash and the USD will regain some of its position and be stronger?
Hi Anon 6:53
With the collapse of the PIIGS, it will be like taking one leg off of a three legged stool. I believe that it will collapse the banking structure globally.
The Euro is a strange animal, it is destined to fail only because politicians can't fiddle with it. It's short coming is its greatest asset, they can't print Euros (as of yet). In the end, the PIIGS will abandon the Euro and every country will go back to a national currency.
If you look at who has the biggest Ponzi scheme going, then,what Bernanke and Geithner are doing starts to makes sense.
We are probably looking at a global credit meltdown. I don't look for the dollar to be any sort of world back-up currency, nobody is going to want to hold it.
"If you look at who has the biggest Ponzi scheme going"
Is that why Geithner wants out?
Hi Anon 5:52
I read that today also. Kind of strange, I didn't hear anyone yell "abandon ship." Must be a silent drill.
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