There was a very good article in Zero Hedge this week entitled America’s Insolvency is Mandatory. It was written by Brian McGlinchey of the Libertarian Institute. McGlinchey argues that Mandatory spending (entitlement programs) are squeezing discretionary spending. Back in 1965, mandatory spending comprised 34% of all spending, with 43% left over for military and 23% for domestic discretionary spending. The tables sure have turned! In 2022, mandatory spending comprises 71% of all spending, leaving only 13% for defense and only 16% for domestic discretionary spending.
We’ve written about this before. Our focus is on the danger of the growing debt of the United States, fueled by runaway spending and a very accommodative Federal Reserve. According to McGlinchey, “on its current course, the debt will soar to 185% of the country’s entire economic output by 2052.” This is, in our opinion, the real existential threat; for as our debt continues to grow, it threatens the financial well-being of our children and grandchildren.
Leaving aside for the moment the possibility of increasing revenue growth due to changes in the US tax code, and assuming that there is no will in the Congress and the President to reduce entitlement spending, can Congress and the President work together to reduce domestic discretionary and military spending? Unfortunately, there exists the real possibility that they will definitely work together, but only to increase both Domestic and Military spending.
In regard to domestic spending, reports surfaced this week that the Biden Administration is looking to drastically increase federal spending through a massive omnibus bill during the lame-duck session. The President is asking for more than $47 billion to be spent on aid to Ukraine, Covid-19 and other projects. This is more than an entire year’s worth of regular appropriation for the departments of Agriculture and Interior combined!
Although the Republican party is making loud noises that it will curtail the growth of spending when they take control of the House of Representatives on January 3rd, the question remains whether they will really follow through on their goal. We’re skeptical it will happen, for we think the noble bi-partisan tradition of “log rolling” will intervene. We predict that the Democrats will back an increase in military spending in return for an increase in the amount of domestic spending, and the Republicans will happily agree.
Actually, both parties want increased military spending. This week reports emerged in Washington that Republicans and Democrats have reached a compromise that will increase President Biden’s defense spending plans by $45 billion. The White House had originally sought $802 billion for national defense programs in its fiscal 2023 budget, but the prospective deal would set the budgeted amount for the fiscal 2023 budget at $847 billion for national defense, and it is possible that the final number could go as high as $858 billion.
Do you think that possibly Democrats and Republicans could find common ground in eliminating waste in military spending? They might, if they could ever find it! Since the early 1990s, Federal law has required mandatory audits for all government agencies. In its latest report, 1,600 auditors for the Department of Defense combed through DOD’s $3.5 trillion in assets and $3.7 trillion in liabilities, and found that the department couldn’t account for about a whopping 61% of its assets. According to Pentagon Comptroller Mike McCord, those assets include nearly 2.9 million military personnel; equipment and weapons including 19,700 aircraft and more than 290 ships; and physical items including buildings, roads and fences on 4,860 sites worldwide.
If they can’t find all those assets, maybe the Pentagon should fire all those auditors and hire the anti-war organization World Beyond War. It has launched a new online tool that allows the user to view the 867 U.S. military bases in countries other than the United States, and it allows users to zoom in for a satellite view of and detailed information on each base. The tool also allows filtering the map or list of bases by country, government type, opening date, number of personnel, or acres of land occupied.
I think the real question is why in the world do we need 867 military bases around the world? Why can’t we consolidate, and save some money in the process? Businesses do it all the time. In addition, at a time when our federal debt is growing leaps and bounds, why can’t we push our allies to shoulder a bigger share of the financial burden?
Former President Trump gave it a mighty try. In June 2020, he announced a plan to withdraw 9,500 American troops from bases in Germany by September, a cut of 27.5%. President Trump’s plan was to redirect some of those troops to Poland, the Far East and even back home to America. He did so, in part, due to his frustration that Germany was not living up to its agreement to meet a NATO target of defense spending of 2% of GDP. He was also upset that Germany was becoming too reliant on Russian natural gas for its energy needs.
Although history has shown that then President Trump was correct in his reasoning, his plan was roundly criticized by both Democrats and Republicans, and when President Trump was defeated in the 2020 Presidential election, it was back to the status quo as President Biden reversed Trump’s decision.
It’s our opinion here at The Existential Threat that our federal debt is too large to continue with business as usual. As a country, we can go broke really fast by making military commitments in areas where we are not wanted or even needed. As a country we need to find a way to drastically reduce the growth in both domestic and military spending as well as finding a way to curb the growth of mandatory spending.
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