The Tax-Reform Debate and Defense Spending

By Jim Talent

Friday, December 01, 2017

It looks very much as if, once again, the national defense is going to get the short end of the budgetary stick this year. But at least other events are exposing the pretenses that have kept the defense sequester in place since 2013.

This refreshing moment of clarity comes by way of the GOP tax-reform plan.

The Senate is supposed to vote on its version of tax legislation this week, after the House voted on its version before the Thanksgiving holidays. As in the House, the Senate bill will be passed (assuming it gets 50 votes) through the budget-reconciliation process, under instructions that allow Congress to increase the deficit by $1.5 trillion over ten years. (I should add that the proponents of the tax bill believe, as I do, that it will generate economic growth and higher-than-expected revenues, increasing the deficit substantially but not as much as projected.)

The idea is to stimulate the economy through a combination of tax relief and tax reform. Deficit reduction, it seems, is no longer important. Even the House Freedom Caucus, the biggest deficit hawks in the Congress, supported the tax bill that passed the lower chamber.

The Democrats had their own “stimulus” bill in 2009: an $800 billion package of government funding that was supposed to be used for “shovel ready” projects, but that actually took three or four years — no one is exactly sure — to spend. That measure also vastly increased the short-term deficit.

Now, I support the tax bill, because it comports, at least broadly, with my view about how to create genuine economic growth. I would have voted against the 2009 stimulus had I been in office, because I do not believe that funding an indiscriminate array of government programs will create private-sector growth.

But my point is this: Both parties are willing to downgrade their concerns about the deficit when an important enough priority comes along. (Here, Republicans’ priority is growing the economy, while at the same time convincing voters that their representatives are capable of governing effectively on their behalf.) So why, if the deficit is not an overriding concern, should the Department of Defense continue to operate under a budget cap that, beginning in 2013, cut $1 trillion from its budget?

Again, it’s not because we’re in an era of fiscal constraint. The tax bill and the stimulus prove that. Nor is it because the money is unneeded. As Defense Secretary Jim Mattis testified earlier this year:

I retired from military service three months after sequestration took effect. Four years later, I returned to the Department and I have been shocked by what I’ve seen with our readiness to fight. For all the heartache caused by the loss of our troops during these wars, no enemy in the field has done more to harm the readiness of our military than sequestration.

No one argues that Mattis is wrong. In fact, only two weeks ago the House passed a bill authorizing a $700 billion defense budget, almost $150 billion above sequester levels. The vote was 356–70.

That’s right. The House of Representatives, which is so divided that it couldn’t achieve a consensus on whether the sun rises in the East, voted overwhelmingly in favor of a defense budget that is $150 billion above the current caps. That authorization won’t be effective unless the caps are removed by separate legislation, but it represents a stunning bipartisan admission that, as former secretary of defense Leon Panetta predicted in 2012, the sequester has been “disastrous.”

Everybody knows what has happened, and what needs to happen now. Everyone knows that money will eventually have to be pumped into the Department of Defense to make up for the gross irresponsibility — there are no other words for it — of the last five years.

It probably won’t happen for a while yet, because the national defense is not yet an important enough issue to justify the kind of political risks and internal compromise necessary to pass a clean bill removing the domestic sequester. So for the time being, the caps will stay in force, perhaps under a short-term deal that gives the DOD enough money to put a Band-Aid on its worst wounds. That deal, if it happens, will be accompanied by talk of reforming the Pentagon’s accounting systems, or changing its procurement practices, or starting another round of base closings — all reasonable ideas, all used as a fig leaf to avoid confronting the enormous budget shortfall.

But the caps will eventually be removed, because the armed forces are the foundation of American national security and they have declined to the point that they can no longer effectively deter the threats rising in the Northwest Pacific, the South China Sea, Eastern Europe, and the Middle East.

When risk rises high enough for long enough, it becomes reality. Some decisive event is going to occur, with consequences so devastating that they change the political environment. Then the national defense will be a priority, the deficit will be deemed unimportant, the caps will disappear down a memory hole, and the government will spend far more money responding to the disaster than the caps ever saved in the first place.

But in the name of common sense, why wait until a terrible forfeit is suffered? Why dig the hole deeper? Why not act now, with a proactive, balanced, and decisive buildup of America’s armed forces which, coupled with a purposeful foreign policy, would make America more secure and protect its interests?