Tag Archives: Cato Institute

Why deep defense cuts MUST be avoided at all costs

I could just as well title this article “why defense must always be fully funded” or “why America must always maintain a strong, second-to-none defense”, but all three titles effectively mean the same thing, so I have chosen the above one.

We are being told from all directions by various kinds of people – from liberals like Clinton Admin official Gordon Adams to libertarians like Justin Amash and Mick Mulvaney to supposed conservatives like Rush Limbaugh that America can afford deep cuts in the defense budget and still have a strong military; or, in the case of other libertarians, like the Students For Liberty/Ron Paul crowd, that America doesn’t need a strong military, that it would only be a tool of oppression, and that America can safely retrench and hide behind oceans and nothing will threaten it.

But all of those claims are garbage, and in this article, I’ll show you why. They might’ve made some sense during the 18th century, when any attack on America would’ve had to be a seaborne invasion or one from Mexico or Canada.

But in the 21st century, when America has vital interests around the world, when its economy is deeply interconnected to those of its allies and friends (such as Japan and South Korea), and in the era of nuclear weapons, ICBMs, ballistic missile submarines, intercontinental bombers, EMP weapons, and cyber attacks, such beliefs are utterly ridiculous. Those who indulge them live in a kum-ba-yah world.

Let us start with this timeless principle taught by Sun Tzu in his Art of War (ch. 8, v. 11):

“The art of war teaches us to rely not on the likelihood of the enemy’s not coming, but on our own readiness to receive him; not on the chance of his not attacking, but rather on the fact that we have made our position unassailable.”

We should not delude ourselves that we will never be attacked, or not for a long time, or that America is somehow invincible or unassailable, or that its military is overwhelmingly superior when this is clearly not the case.

Providing for the common defense is not only necessary, it is the Federal Government’s #1 Constitutional DUTY. Art. IV, Sec. 4 of the Constitution clearly imposes this obligation on the government; the majority of enumerated powers granted to the Congress deal with military matters; and the Preamble to the Constitution – makes it clear that one of the reasons why the federal government was create in the first place is to “provide for the common defense”. Furthermore, the military is the ONLY significant expenditure authorized by the Constitution. Federal entitlement and welfare programs are utterly unconstitutional and thus illegal.

Furthermore, the claim – often made by proponents of deep defense cuts in order to lull Americans into a false sense of security – that the US military is still overwhelmingly superior to those of other countries – is completely false (although I wish it was true). The militaries of China and Russia, as documented in detailed analysis here, have already closed the vast majority of the gaps between their and the US military’s capabilities, and are now working hard on closing the remaining few gaps. Where those gaps still exist, as in aircraft carriers, for example, China and Russia have created asymmetric advantages of their own with anti-access/area-denial weapons such as aircraft carrier killing missiles.

For a detailed analysis of China’s and Russia’s military capabilities, see here.

Another oft-made false claim which is supposed to justify deep defense cuts is that they could supposedly be done safely if the military were just granted the flexibility to decide where to make the cuts and that if such reductions are made “strategically”, in a “targeted” manner, they can supposedly be done safely.

The “studies” produced by CATO, the “Project on Defense Alternatives”, the Center for American Progress, POGO-TCS,  the NTU, and Sen. Tom Coburn (RINO-OK) are often invoked as examples and as supposed “proof” that deep defense cuts can be done safely.

But I have read and analyzed virtually all of these “studies”, and ALL of them would, if implemented (God forbid), result in the utter gutting of the US military. Why? Because the vast majority of the cuts they call for would be directed at the muscle and bone of the US military – the force structure (i.e. the size of the military), its personnel, weapons, munitions, and forward deployments.

These “studies” call for deep personnel, weapon inventory, weapon program, and force size cuts across the board to all four Services (Army, Navy, Marine Corps, Air Force) and to the already barely-adequate nuclear deterrent. They call for killing dozens of crucial modernization programs, including the Long Range Strike Bomber, the ICBM replacement program, the V-22 Osprey, the F-35, the Virginia class, and many others.

If one were to plan on how to completely gut the US military, one could not come up with a better plan than those produced by the above-mentioned leftist think-tanks (most of which, including CATO, POGO, and the CAP, are co-funded by George Soros) and by Sen. Coburn. These plans seem to be deliberately designed to gut the US military.

And NONE of these proposals or “studies” are really “strategic”, because none of them are underpinned by any strategy, only by a desire to gut the US military. Strategy is about setting priorities, funding them fully, and cutting back only on non-priority programs/objectives/activities; failure to set priorities and to fund them adequately is essentially the same thing as sequestration.

But in those “studies”, there are no priorities – like sequestration, they all call for deep, across-the-board cuts to everything the US military has and does – mostly to the muscle and bone of the military.

The first and only “priority” of these studies’ authors is to gut the US military, plain and simple.

I have refuted these ridiculous “studies” here, here, here, and here among other articles.

For his part, HumanEvents columnist Robert Maginnis wrongly claims that the US can make these cuts safely if it simply scraps a number of current missions.

But that is wrong. To make cuts on the scale of sequestration, the US military would have to jettison dozens of missions – including many crucial, necessary missions connected to America’s own national security (not just that of its allies). For example, air, naval, and ground superiority, nuclear deterrence, and missile defense.

Those who call for jettisoning many military missions and cuts on the scale of sequestration need to be made to say what exact missions they think the military should scrap and be forced to admit that doing so would mean not meeting America’s security needs and thus imperiling national security.

As then-SECDEF Robert Gates said in 2011:

“These are the kinds of scenarios we need to consider, the kinds of discussions we need to have.  If we are going to reduce the resources and the size of the U.S. military, people need to make conscious choices about what the implications are for the security of the country, as well as for the variety of military operations we have around the world if lower priority missions are scaled back or eliminated.  (…)  To shirk this discussion of risks and consequences – and the hard decisions that must follow – I would regard as managerial cowardice.

In closing, while I have spent a good  deal of time on programmatic particulars, the tough choices ahead are really about the kind of role the American people – accustomed to unquestioned military dominance for the past two decades – want their country to play in the world.”

Then there are those like Rush Limbaugh and Rand Paul who falsely claim that sequestration would be a mere cut to the growth rate of defense spending. But that is a blatant lie.

As the CBO has proven, and as I have documented here, sequestration would cut the base defense budget from $525 bn today to $469 bn in March and keep it well below today’s level (and even below $500 bn) for the next decade at least. By FY2022, the last year of the “sequestration decade”, the base defense budget would be at $493 bn – still below $500 bn and well below today’s level of $525 bn.

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Meanwhile, OCO (war) spending is shrinking annually from its FY2011 peak and is set to disappear in FY2016, once all US troops leave Afghanistan.

The DOE’s defense-related (nuclear) programs and the DOD’s unspent balances from previous years are also subject to sequestration, as are all other national-security-related agencies.

In other words, sequestration would be an IMMEDIATE, REAL, DEEP, and PERMANENT cut in defense spending. It would not be a mere cut in the rate of growth. In other words, Rush, Rand, and other sequestration pooh-poohers are blatantly lying. (And the people spreading that lie are children of the Father of Lies himself.)

President Ronald Reagan articulated the need for a strong military – and the case against defense cuts – well here and here.

Let Robert Gates – a man of whom I’ve been very critical – nonetheless have the last word here:

“Since I entered government 45 years ago, I’ve shifted my views and changed my mind on a good many things as circumstances, new information, or logic dictated.  But I have yet to see evidence that would dissuade me from this fundamental belief: that America does have a special position and set of responsibilities on this planet.  I share Winston Churchill’s belief that “the price of greatness is responsibility…[and] the people of the United States cannot escape world responsibility.”  This status provides enormous benefits – for allies, partners, and others abroad to be sure, but in the final analysis the greatest beneficiaries are the American people, in terms of our security, our prosperity, and our freedom.

I know that after a decade of conflict, the American people are tired of war.  But there is no doubt in my mind that the continued strength and global reach of the American military will remain the greatest deterrent against aggression, and the most effective means of preserving peace in the 21st century, as it was in the 20th.”

Free trade is for idiots

For decades, globalists and libertarian free trade ideologues have been telling us that free trade has been “good” for America, that it’s a traditional conservative/Republican policy, and that any suggestion that America should protect its industry – i.e. protectionism – is a Big Government policy and a betray of “free market principles”. Free trade is the religion of the CATO Institute, the Mercatus Center, the Heritage Foundation, and the so-called Club for (Corporate Profits) Growth, which should call itself the Club for Corporate CEOs’ Greed).

But they are wrong. Protectionism, not free trade, has traditionally been the policy of conservatives and Republicans, and it is the policy on which nations ascend economically; they descend on free trade.

Every nation which ever became a great power – from England under the Acts of Navigation, to Colbert’s France, to the US from 1861 to 1945, to postwar Japan, to China today – became such because it protected its economy (especially its industry).

Unlike Hamilton, Clay, and Lincoln, the free trade ideologues at the forementioned organizations never built a great nation.

Republicans won their first presidential election in 1860 (while also capturing the Senate) running on a pledge to institute tariffs to protect the industry. And they did. This nearly insulated America’s (or rather, the North’s) growing industry, allowing it to become the envy of the world. Successive Republican Presidents and Congresses continued these policies, shielding American industries with protective tariffs, thus allowing these industries to grow and leading America to overtake Britain (and the rest of the world) by all measures of industrial production (including coal mining and steel production) by the 1890s.

Protectionist tariffs on foreign products also allowed Congress to keep the books balanced and pay Civil War debts quickly while keeping taxes on Americans and American companies low. Before 1913, there wasn’t even any federal income tax.

America thus became the greatest industrial power on Earth, the envy of the world.

I said “successive Republican Presidents and Congresses”, because a protectionist economic policy proved itself to be not only economically successful, but also politically popular. From 1860 to 1924, the GOP – then known as the Party of Protection – put 12 presidents in the White House, versus only 2 Democrats.

By 1945, America, partially thanks to its protectionist policies and partially due to the destruction that WW2 inflicted on Europe and Asia, accounted for 42% of the world’s industrial production.

But then, something happened.

American political elites (including, increasingly, Republicans) caught the free trade virus and indulged in suicidal “free trade” economic policies.

The US joined the WTO organization, where it doesn’t have a vote, signed the GATT, and signed free trade agreements with many countries, opening its markets to their products while they kept their markets firmly closed to American goods and services.

Thus, the US stopped posting trade surpluses and, starting in 1971, began to run trade deficits which, since 1971, have been growing almost nonstop.

Big corporations, always greedily lusting for more profits and bigger salaries for their CEOs, began shipping jobs overseas.

By the 1980s, the situation was so dire that Ronald Reagan recognized the problem and asked the Congress to institute protective tariffs.

Yet, America’s slide towards the abyss on the skis greased by free traders was only slowed down, not stopped. In 1992, the US, at President Bush’s behest, suicidally signed NAFTA, opening its market to cheap Mexican products. In 1993, Republicans saved NAFTA from defeat by voting for it together with the pro-free-trade wing of the Democratic Party. Republicans literally rescued NAFTA from the dustbin of history (where it belongs) by voting for it – and thus own it.

The result? Millions of good-paying industrial jobs were lost, as factories were shipped to Mexico. Before 1993, the US had a trade surplus with Mexico. Since 1993, it has had a trade deficit with that country every single year.

In 1994, China began, on a large scale, its campaign to maximize its exports while closing its market to imports, and thus to steal Western industries, by devaluing its currency by 45%. Simoultaneously, tariffs on foreign products were hiked, and export rebates to Chinese exporters began to be provided, similarly to how they are provided in Japan.

(Japan has a 15% VAT rate on products sold on its soil, but it provides a rebate to its exporters for every product they sell abroad. So cars exported to the US face no American tariffs and are even rebated by the Japanese government, while American cars exported to Japan are taxed 15% as soon as they arrive at the Yokohama docks).

Yet, despite Chinese cheating on trade, the Congress – dominated by Republicans – gave China Most Favored Nation trade status, thus absolving Chinese products of most tariffs (while China did not reciprocate). In 2001, the Congress gave China that status permanently. In 2002, a Republican President allowed China to join the WTO. Thus, Chinese products enter America almost free of any tariffs or duties, but American products shipped to China are subject to steep tariffs.

Yet, Republicans, instead of learning from their mistakes, doubled down on their “free trade” policies. They gave Vietnam Most Favored Nation status in 2007. They gave President Bush an unconstitutional unilateral “expedited” negotiation authority to negotiate even more one-sided, unfair free trade agreements for dupes. They supported the FTAs Bush signed with Panama, Colombia, and South Korea late in his term.

In the 2008 election, all leading Republican candidates – McCain, Romney, and Giuliani – ran on free trade platforms.

The eventual Republican nominee, John McCain, even scaremongered people about “the siren song of protectionism” and went to a closed Ohio factory (which was closed because its owner shifted production overseas).

It didn’t endear him any voters, however. In the 2008 election, proud free trader John McCain was crushed 373-165, by the biggest margin of any Republican candidate since Barry Goldwater, losing even longtime Republican states like North Carolina, Indiana, and Virginia.

The election of Barack Obama probably gave some Americans hope that he would uphold his campaign promise to withdraw the US from NAFTA and to protect the US industry. He didn’t. He has barely been willing to impose tariffs on imported tires to save the tire industry.

With their own free trade mistakes costing them politically and the country economically, Republicans should have had, by 2012, learned that they were wrong and should have proposed a better policy, right? Wrong. Most Republicans continued to cling to their free trade ideology, as did the 2012 Republican nominee, Mitt Romney, who lambasted Obama for not signing any new FTAs for dupes (as if that were a bad thing), pledged to negotiate new FTAs, and firmly embraced free trade ideology. And although he pledged to designate China a currency manipulator if elected, and to enforce intellectual property laws, he wasn’t willing to do anything more than that, and even these half-measures earned him the ire of free trade ideologues such as the think-tanks and organizations listed above.

So, as the year 2012 begins to draw to an end, let us take inventory of 67 years of “free trade policies”.

They have destroyed the greatest industrial base the world has ever seen.

They have caused 55,000 factories to be closed and production to be shifted to countries where people work for slave wages and where there are no real environmental protection laws.

They have caused tens of millions of Americans to lose their well-paying manufacturing jobs and middle class worker wages to stagnate, in real terms, for over 2 decades.

They have brought about disastrous consequences for national security, as America is now dependent on foreign countries for essential things, even things essential for defense, such as Rare Earth Elements and the products made from them.

They have cost the Republican Party successive Congressional and Presidential elections, as former industrial powerhouses such as Ohio, Michigan, North Carolina, and Virginia – formerly red states – have turned against the GOP and become blue or purple states. Republicans have not win Michigan since 1984 and have lost both Ohio and Virginia in both of the last 2 presidential elections.

The GOP’s reputation as the Party of Protection has been tarnished and replaced by the reputation of a party that kowtows to big businesses and outsources jobs overseas.

America, formerly self-sufficient and producing everything in the world, now imports virtually everything it needs, from textiles and simple products to cars and Advanced Technology Products like computers and cell phones.

America lost her crown as the biggest exporter in the world to Germany in 2003, which itself was overtaken by China around 2010.

America’s trade deficits with Mexico, Japan, the EU, and the world at large are the highest they have ever been.

America’s trade deficit with China is the highest ever between any two countries.

And what were these trade deficits paid for with? Borrowed money. America is now the largest debtor in world history.

And to pay for lost revenue from abolished tariffs on foreign products, taxes are being hiked on Americans and American companies.

Can America be rescued? Yes, it still can, but there isn’t much time, and it will require a complete break with the free trade ideology and policies of the free trade ideologues running the CATO Institute, the Heritage Foundation, the Mercatus Center, and the Club for Corporate CEOs’ Greed. The US should:

  • Immediately implement the Export-Import Certificates proposed by Raymond, Howard, and Jesse Richman. This means that no country would be allowed to export more to the US than it imports from America.
  • Immediately impose a 25% tariff on all Chinese products imported into the US. China will then have a choice between letting American products into its market or financing the US Pacific Fleet.
  • Strictly enforce intellectual property laws.
  • Write, and strictly enforce, product quality standards on all imported products.
  • Terminate the useless Export-Import Bank.
  • Withdraw from NAFTA, the WTO, and the GATT.
  • Abolish all loopholes in the taxcode and use the resulting revenue (as well as the revenue coming from tariffs on Chinese products) to cut taxes across the board for all Americans and all American companies. The corporate income tax rate should be no higher than 12.5% (it’s 35% today).
  • Designate China as a currency manipulator.

Tens of millions of jobs will then be created and production will be shipped back to the US – because then, in order to sell products in the huge American market, you will have to produce things in the US. And foreign countries wishing to export to the US will have to open their own markets to American products on the basis of reciprocity.

Barack Obama: The Anti-Keynesian?

New York Times columnist and economist Paul Krugman thinks Barack Obama is an “anti-Keynesian” when it comes to economic matters.
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PAUL KRUGMAN: Can I just say, on the Reagan thing, if public-sector employment had continued to expand the way it did during Reagan’s first term, instead of falling by about 600,000 as it has, right there we’d have something like 1.4 million people working in this country.

So if you actually look at the actual track record of government spending, government employment, Reagan is the Keynesian and Obama — mostly because of political constraints, although a little bit of lack of conviction on the part of his own people, has been the anti-Keynesian. He’s been the one who’s been doing what Republicans say is the right answer.

Ronald Reagan was not a Keynesian.  As Milton Friedman noted in his speech at the opening of the Cato Institute in 1993, “Reaganomics had four simple principles: lower marginal tax rates, less regulation, restrained government spending, noninflationary monetary policy.  Four cornerstones that led to the following:

Real economic growth averaged 3.2 percent during the Reagan years versus 2.8 percent during the Ford-Carter years and 2.1 percent during the Bush-Clinton years. Real median family income grew by $4,000 during the Reagan period after experiencing no growth in the pre-Reagan years; it experienced a loss of almost $1,500 in the post-Reagan years. Interest rates, inflation, and unemployment fell faster under Reagan than they did immediately before or after his presidency. The only economic variable that was worse in the Reagan period than in both the pre- and post-Reagan years was the savings rate, which fell rapidly in the 1980s. The productivity rate was higher in the pre-Reagan years but much lower in the post-Reagan years.

Yet, Obama is anti-Keynesian after spending $830 billion dollars on a failed stimulus program that had left the unemployment rate over 8% for over 38 months.  A program that would never allow unemployment to rise above 8% and would produce robust economic growth.  All of this would be induced by deficit spending. The president stated that the stimulus would create 2.5 million “shovel ready jobs” for infrastructure projects.  In fact, in an interview with Peter Baker of The New York Times, the president admitted that “he let himself look too much like “the same old tax-and-spend Democrat, realized too late that there’s no such thing as shovel-ready projects and perhaps should have let the Republicans insist on the tax cuts in the stimulus.”  In addition, his Vice President, Joe Biden, reiterated the Keynesian approach of this administration three years ago by stating that we must spend our way out of bankruptcy.

Also, to say”[Obama’s] been the one who’s been doing what Republicans say is the right answer” is patently false.  Republicans aren’t for class warfare legislation, like the Buffet Rule tax reform, that institutes a mandatory 30% tax on millionaires, but leaves the charitable donation deduction.  Hence, the rich, also known and the job creating and investing class, could donate their way out of taxation.  Furthermore, Republicans never were for spending a trillion dollars on a new health care entitlement, Obamacare, that will cut 20 million Americans from their coverage while making 49 million more citizens dependent on government run medical services.

Nevertheless, it didn’t stop Paul Krugman from making more patently false remarks on ABC’s This Week.

KRUGMAN: Can I just — these are — these are — we’re talking as if $1 billion was a lot of money, and in $15 trillion economy is not. Solyndra was a mistake as part of a large program, which has been — by and large had a pretty good track record. Of course you’re going to find a mistake. I think, to be fair, that’s probably true in Massachusetts, as well.

But this is — this is ridiculous, that we are taking these tiny, tiny missteps which happen in any large organizations, including corporations, including Bain — Bain Capital had losers, too, right, even from the point of view of its investors? So this is ridiculous.

And the fact of the matter is, this president has not managed to get very much of what he wanted done. He — it’s terribly unfair that he’s being judged on the failure of the economy to respond to policies that had been largely dictated by a hostile Congress.

First of all, concerning clean energy initiatives, Solyndra is the tip of the iceberg.  Furthemore, it’s not just $1 billion dollars as:

CBS News counted 12 clean energy companies that are having trouble after collectively being approved for more than $6.5 billion in federal assistance. Five have filed for bankruptcy: The junk bond-rated Beacon, Evergreen Solar, SpectraWatt, AES’ subsidiary Eastern Energy and Solyndra.

SunPower landed a deal linked to a $1.2 billion loan guarantee last fall, after a French oil company took it over. On its last financial statement, SunPower owed more than it was worth. First Solar was the biggest S&P 500 loser in 2011 and its CEO was cut loose – even as taxpayers were forced to back a whopping $3 billion in company loans. Nobody from the Energy Department would agree to an interview.

How safe were the loans?

[Economist] Peter Morici replied… It’s, it is a junk bond…but it’s not even a good junk bond. It’s well below investment grade. Was the Energy Department investing tax dollars in something that’s not even a good junk bond? Morici says yes. This level of bond has about a 70 percent chance of failing in the long term,” he said.”

Furthermore, Robin Millican, Policy Director for the Institute for Energy Research, has stated how the Section 1603 program has allocated $20 billion dollars in cash payments, not loans that need to be repaid, to companies that install solar, wind and geothermal properties.  Congress wants to extend this program for an additional year at the tune of $3 billion dollars.

Lastly, the president has achieved most of his domestic agenda.  Obamacare was the signature achievement in the president’s first term.  In addition, there was Cash for Clunkers, Dollars for Dishwashers, Cash for Caulkers, and the Dodd-Frank Wall Street Reform and Consumer Protection Act.  If Mr. Krugman thinks the president is dealing with a hostile congress, he only needs to look at the docket that shows this hostility has produced a multitude of legislation aimed at creating jobs and curbing the debt and deficit.  Most of the bills have been blocked by the Democratic controlled senate.

(h/t Noel Sheppard)