Defense Spending 2013: How to Boost Military Spending and Cut the Deficit All At Once (Yes, It's Possible)


It probably will not come as a great shock to anyone to read that the United States spends more money on its military than the next 10 highest spenders combined spend on theirs. Last year, the U.S. defense budget was $682 billion, while those (in order of amount spent) of China, Russia, the United Kingdom, Japan, France, Saudi Arabia, India, Germany, Italy, and Brazil totaled $652 billion. What may come as a surprise, at least to those inclined to see large military budgets as wasteful with the war in Iraq over and the war in Afghanistan winding down, is just how necessary such a large investment in national and international security is.

Fighting a traditional, country-versus-country war like the Persian Gulf War of 1991 is only one of many contingencies for which the U.S. armed forces must be prepared. These include counterterrorism, counterinsurgency, disaster relief, and on some occasions humanitarian intervention. Despite talk during the 2011 intervention in Libya of “leading from behind,” it was the U.S. that provided most of the firepower for that operation, a fight that was both morally righteous and strategically beneficial for America and its allies. If NATO decides to intervene in a similar fashion in Syria (and hopefully it will do so soon, in addition to arming anti-Assad forces), America will have to lead the way once again.

Another key job of the U.S. military is protection of the global commons, the sea lanes, airways, outer space, and cyberspace, which governments, businesses, and individuals need for the free flow of goods (including oil supplies), services, and ideas that the modern global economy depends on. For all the talk about the rise of China as a potential superpower competitor to the U.S., China has a long way to go before it obtains the truly global military reach that the U.S. enjoys. As for America’s European allies, too many of them, for various reasons, have allowed their defense budgets to shrink to dangerously low levels. Until the other members of NATO heed the warnings of former Secretary of Defense Robert Gates two years ago, the U.S. will have to shoulder most of the burden of NATO operations.

One might object that it is not desirable for one country, even the one with the world’s largest economy and most powerful military, to invest so much money (and potentially blood) in the protection of global commerce. But this is beside the point. Unless one is alright with the modern economy collapsing due to lack of protection from terrorism, piracy, rogue states, and other threats, one must accept the simple fact that the modern economy needs protection against these threats. The global commons do not protect themselves, and until other countries are capable of protecting them to a greater degree (something that would admittedly be desirable), that task will fall to the U.S.

This is not to say that military spending should not be cut at all. There is one portion of the U.S. defense budget that could certainly stand to be trimmed: nuclear weapons. In the spring 2010 issue of Strategic Studies Review, three experts on the U.S. Air Force argued that the U.S. could unilaterally reduce its nuclear arsenal to 311 warheads (far below the maximum 1,550 allowed under the New START Treaty), and still be able to deter a nuclear first strike. Since the U.S. is projected to spend about $640 billion on maintaining its nuclear arsenal and related systems over the next decade, a large cut in its size (even a cut not as deep as that mentioned above) is at the very least worth considering.

But across-the-board cuts in the defense budget, a la sequestration, are downright reckless. With deficit hawks having dominated the debate over U.S. fiscal policy for so long, many Americans assume that their national government can afford to cut large sums of money from most or all aspects of its budget, including the military, and be perfectly alright. In truth, U.S. budget deficits are at least as much a function of low revenues as of high spending, right-wing anti-tax fanaticism notwithstanding. Two potential large sources of revenue deserve much more consideration in Washington than they are currently receiving.

First, a value added tax (VAT), a form of sales tax already employed by most industrialized countries. Since it is levied on goods and services at every stage of production, it is easy to collect, because each participant in the production process must verify that the participant before them paid their share of the tax. In 2009, the Tax Policy Center estimated that by 2019, a 5% national VAT could raise more than $400 billion annually. The fact that such a tax is regressive should not deter a much needed debate about its implementation.

Second, a financial-transaction tax, a tax the U.S. actually levied from 1914 to 1966. A 2009 bill proposed by Rep. Peter DeFazio (D-Or.) and Sen. Tom Harkin (D-Iowa) would have taxed transactions of stocks, bonds, and other financial assets, at rates no more than 0.5%. The Center for Economic Policy Research and the University of Massachusetts estimated at the time that annual revenue from these levies would be at least $123 billion, and possibly as high as $246 billion. In addition to the large sums of money flowing into the public coffers, this would throw some much needed sand into the gears of an often reckless Wall Street.

Together, these two taxes would provide the U.S. government with more of the money it needs to play its very important role in maintaining international peace and security (even if some of their revenue was used for other purposes, like modest cuts in federal payroll taxes to ease the regressive burden of a VAT). Combined with careful cuts in federal domestic spending, including such measures as indexing Social Security benefits to the “chained CPI,” these new sources of revenue can go a long way toward reducing the federal budget deficit without undermining America’s ability to forcibly protect its strategic and moral interests in the world.

The current absence of an immediate, existential threat to America does not justify Americans letting their guard down. The world of the 21st century contains many complex challenges, and while not all of them can or should be confronted militarily, the ability to use military force is essential for keeping threats to peace and security to a minimum. Luckily, there is a precedent in American history for combining support for both a world-class military and the raising of the revenue needed to pay for it.

In a 2004 article in The New Republic, Peter Beinart described the birth of Cold War liberalism, embodied from the late 1940s to the early 1960s by Americans for Democratic Action (ADA). Although the group has long since degenerated into an advocate of what the historian Arthur M. Schlesinger Jr. called “soft” or “doughface” liberalism, in the first half of the Cold War it stood with equal vigor against communism abroad and conservatism at home. Indeed, ADA argued, the latter, through its insistence on low taxes and low spending, enabled the former. A 1953 ADA message quoted by Beinart asked “whether the national defense is to be determined by the demands of the world situation or sacrificed to the worship of tax reductions and a balanced budget.” The answer of the Cold War liberals, unlike too many of today’s politicians and activists, liberal and conservative alike, was clear: The need for national strength outweighs the desire for low taxes. Let us hope that today’s policymakers show the same resolve.