For the Long Run
Matt Miller writes the deficit hawk’s case for running a giant short-term deficit but says it would be worth thinking short-term about what can be done in terms of the long-term deficit:
Bob Litan of the Brookings Institution suggests building such triggers into Obama’s blueprint from the start. Once unemployment gets back beneath 6%, for example, we could require a supermajority vote in Congress to run deficits higher than, say, 2% or 3% of GDP (by comparison, the trillion dollar figure will push us toward 7%, an all-time high).
Yes, promises like this can be broken. But given the extraordinary circumstances, writing this kind of future restraint into law would tell world markets that we know the debt spree has to end. Obama could also set up a bipartisan commission on Social Security and Medicare with a view to building consensus for action in a second term, by which time the current crisis will, with luck, be a fading memory.
This first idea seems problematic. If you have a weak economy and a huge deficit that succeeds in strengthening the economy, you don’t really want to pivot on a dime and implement a catastrophically sudden fiscal contraction. You’d probably have to change it to be more of a sliding-scale thingy. Besides which, the real long-term issue is the long-term projections — i.e., Social Security, Medicare, and Medicaid — rather than the precise issue of how big the 2011 deficit is going to be. Appointing “a bipartisan commission” would be nice, but what would you be asking the commission to do? Social Security is prone to some basic split-the-difference compromises, but to save money on Medicare you really need to restructure the whole American health care system.
Of course broad restructuring of health care is on the Obama agenda. But I think it would be overly optimistic to expect the first round to result in substantial cost savings. So it’s hard to see what beyond promissory notes you could offer. On Medicaid, by contrast, you’ve got this interesting proposal from Bobby Jindal. That’s happening right now, and the federal government could work to simultaneously push Louisiana in the most constructive possible direction and also, given that, try to facilitate reform and spread best practices to other states. Realistically, that seems like the most promising angle.
The other slice of this is the defense budget. It’s a really big budget. And though it’s desirable in some respects to have this military that costs wildly more than anyone else’s, it’s not really necessary in any recognizable sense. As my colleague Nina Hachigian writes today “Our annual defense outlays are laden with tens of billions of dollars worth of irrelevant weapons systems, such as the F-22 fighter plane—a weapon that costs over $350 million per plane—and would likely be useless if we ever did enter a head-to-head conflict with a big power some decades from now.” To my view, this situation needs to be a huge part of the conversation about keeping Bob Gates on in the Pentagon. He’s made noises in the past indicating that he’s sympathetic to the need for reform. But it’s also under his watch that this plan for a DOD budget ambush on the incoming administration has been hatched. If Gates isn’t willing — eager, I would say — to help push back against that kind of thing, then I’m not really sure what his utility is.
29 Responses to “For the Long Run”
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November 20th, 2008 at 5:29 pm
“Yes, promises like this can be broken. But given the extraordinary circumstances, writing this kind of future restraint into law would tell world markets that we know the debt spree has to end.’
The point is to let investors know that we’re not going to print money to get out of this, or default. In other words, at some point, we’re going to either raise taxes and/or cut spending, to decrease our debt/deficit, which could get very expensive for us to service in the future, among other looming problems.
Japan, for instance, in order to deal with this problem, is considering writing a tax increase into its stimulus. The problem with this is that some worry that instead of spending money, some people will save money against future tax increases and lower income. In this environment, that might not matter, and the Japanese might take saving more seriously than we do. But the concern is the same.
November 20th, 2008 at 5:46 pm
What if, instead of pivoting “on a dime” the requirement would be to have unemployment under 6% for a protracted period of time, like 6 or 12 consecutive months. That would allow spending to continue with the offshoot of a foreseeable “time horizon” to curtail spending.
November 20th, 2008 at 6:21 pm
Ok, I don’t want to derail the thread on something that doesn’t really detract from the point of this post, so maybe someone can give me a link or a quick readers digest summary of why exactly f-22s would be useless in a conflict with a great power. Is it that nukes would kill us all anyway? MY’s link doesn’t explain it. It is just stated as self-evident fact.
November 20th, 2008 at 6:33 pm
There is no good reason to acknowledge the existence of deficit hawks right now. The GOP throws a spending orgy and then when they finally fuck everything up the Democratic party gets to come in and clean up their mess. If everything turns around and we’ve got services and infrastructure in place I’d still leave $500 billion dollars in debt hanging out there just on general principle.
November 20th, 2008 at 6:35 pm
Here’s a short book, scottyns that addresses the Pentagon’s addiction to pricey and complex hardware.
http://cdi.org/program/document.cfm?DocumentID=4404&from_page=../index.cfm
The harping on speed is a particular problem for air forces; because the inability for fighters to slow down, observe, and maneuver makes aircraft vulnerable– especially when they are engaged in air support.
November 20th, 2008 at 7:33 pm
Absolutely right! We need a SecDef willing to cut the Pentagon budget back towards the Clinton-era $300B, or even less. And he (or she) needs to be willing to get rid of any of the top brass who try to play sneaky games to fight the cuts. Gen Powell
should have been fired for the gays-in-the-military pushback.
Make it damn clear that the President sets policy, and that there’s early retirement for anyone who tries to undercut it, and rapid promotion for those who implement it vigorously.
I very much doubt that Gates is the guy for that job. He’s
immeasurably better than Rumsfeld, but then who isn’t ?
November 20th, 2008 at 8:07 pm
The supermajority vote idea is interesting, butfirst I’d like some stats on what percentage of congress actually has shit for brain.l
November 20th, 2008 at 8:47 pm
All I know is Democrats need to never, ever, ever, leave a budget surplus again so that whatever comes after GWB can promise tax cuts and offer to give back the people’s money.
November 20th, 2008 at 9:47 pm
scotty, the argument against the F-22 is that we don’t need to build them now. There’s no conceivable situation in the near future where we’d need them. In the medium and long-term we very well might need more advanced fighters than we have now, but by that time the F-22 won’t be the most advanced fighter we can build anyway. So we should stop producing F-22s and keep working on whatever the successor fighter would be.
I’m not sure I personally buy that argument — we might be better off building F-22s even if we won’t need them for 20 years, given the lead-times with fighter development these days.
November 20th, 2008 at 10:22 pm
How likely is it that we would ever be involved in another great power conflict in which we will need something like F-22s or more advanced? It’s hard to imagine something like that occuring at this point, as the consequences to each country involved would be so devastating that it is nearly inconceivable to think of what would be worth the near destruction of each country that would ensue. Seriously, what could possibly drive, say, the US and China to engage in a full blown war?
November 20th, 2008 at 10:34 pm
The whole China thing is beyond stupid. Where would we have a
war with China ? Not in Taiwan, because the Chinese have no
amphibious capability (and anyway Taiwan is well armed); not
on Chinese soil, because if we can’t manage an occupation of
a country with 25M people, we sure as hell can’t manage China;
not in Korea where we last tangled with them, because if China
took over North Korea we’d be cheering them on. So where ?
And why ?
November 20th, 2008 at 10:46 pm
I think godoggo is largely right. If Obama gets a decent health care plan enacted (i.e. one that is better than what we have now), it will be almost impossible for Republicans to reverse it. Obama’s energy proposals may be easier to reverse, but they are more likely to be tweaked than reversed, so I expect Obama’s energy proposals to have a long term impact. In contrast, Clinton’s budget surplus was history the moment Bush’s first budget passed Congress.
November 20th, 2008 at 10:52 pm
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November 20th, 2008 at 10:56 pm
We talk about reducing the pentagon budget but the things we need the army to do these days require people – not weapons systems.
You can’t effectively police a failed state with a reduced army. Recent republican administrations have been trimming the force by making all forces combat forces and using contractors for support roles like feeding the troops and protecting diplomats.
If we spent more of our money on peacekeepers and less on fighter planes and unmanned drones we would have a lot fewer reports of bombing wedding parties.
November 20th, 2008 at 10:56 pm
Warren Buffett believes that if the deficit exceeds 3% of GDP, no sitting member of Congress should be allowed to run for reelection.
November 20th, 2008 at 11:20 pm
Warren Buffett believes that if the deficit exceeds 3% of GDP, no sitting member of Congress should be allowed to run for reelection.
I wouldn’t use 3% as a hard and fast number, but if you are borrowing and what you are doing is sheer waste that doesn’t contribute to GDP you have massively fucked up. GDP is a stupid metric in a bunch of ways, but it’s hard to figure out a way to borrow and not raise GDP.
The West Germans in the 80’s had their own real estate bubble going and they were building office space, demolishing it and rebuilding it for not apparent reason and it still contributed to GDP. You would have to find something stupider than that and if democrats can find it they indeed don’t deserve power.
November 21st, 2008 at 1:39 am
There’s a case to be made for a limited run of F-22s as concept planes. Not ordered in such quantities as would be needed to engage a peer competitor, but built and used so that we’d have some idea what the next wave of air superiority would look like. Part of the advantage of having such a stupendous defense budget should be that we can walk and chew gum at the same time; we can make sure that our military is sufficient to the needs of the moment while retaining the capability to ramp back up quickly in other areas.
In other words, we don’t need to build a huge fleet of F-22s. We need to be able to build a huge fleet of F-22s if we suddenly need them. Or something like that.
November 21st, 2008 at 8:33 am
Oh come on, one of the reason an F22 cost so much per copy is that the R&D costs are divided into the number of planes made. If you mothball the facilities in case you need to make more for a conflict, the cost per plane goes up more. The battle becomes, do we need the Lexus versions of every type of military hardware. If you are a blogger sitting comfortably in your bunny slippers typing, the answer is often no. If your kid is going in harms way, it better be a Lexus +. Granted, we may not need F22s or other systems now, but they take years to develop. None of you know what the future brings. Its like the stock market – diversify to bring down your overall risk. In defense, you need some capacity of each type in case things go really bad. Some light forces, some heavy, some nuke. The question is always how much of each.
November 21st, 2008 at 9:31 am
Since we can’t get sunk costrs back, each subsequent unit costs about $175 million – less if we buy more – more if we hedge by keeping our options open.
If “some” is 4, that’s true. In thirty years, it will probably still be the best fighter in the world. I suppose it is a real possibility that fighters will not be useful by then, but it is by no means certain.
On the whole, we probably shouldn’t have started the project. Having done that, though, we should build enough for realistically conceivable need before shutting down the assembly line. The F-15 isn’t the best fighter in the world anymore.
November 21st, 2008 at 10:51 am
$350 million for a jet fighter is nuts. So is $175 million for that matter. The reason our defense budget is so bloated is that people adopt an attitude like Arugs’s, saying that, essentially, nothing is too expensive if it protects our boys and girls in combat.
That sounds good, but there are a couple of problems with this line of thinking. First, you need to ask, why do our boys and girls need to be in combat in the first place? And second, if we end up bankrupting ourselves to the point where we can no longer afford to even buy body armor or bullets for that matter, how exactly are we protecting our boys and girls in combat?
The US spends massively more than any other country on its military. That alone should tell you that our military is not for defense. We have multi-billion dollar weapons systems without missions. We have no enemies that our military can protect us from. Cutting the military budget to Clinton-era levels would be a nice start. Better would be cutting it to less than $200 billion.
If an actual military threat starts to emerge somewhere in the world, we can start to re-arm. Until then, we really have other, greater threats to our security.
November 21st, 2008 at 12:49 pm
An Democrat who even proposes this insane suggestion should be immediately removed of their post. Seriously, writing into law a supermajority for any budget related items could seriously hamper the future of the Democratic party should events unfold that remove our current advantage. Please, do come again though.
November 21st, 2008 at 1:31 pm
Reducing the military budget seems more a congressional problem than an executive one. Congressmen fight tooth-and-nail to keep military bases open that the Pentagon begs to close and usually succeed; so if even the Pentagon is too inertial to propose upending the weapons systems status quo, what of the members whose districts build them?
Nothing will happen until the Congress is force-fed to accept weapons cuts… probably by a spending crisis. Not by a new secretary or president.
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