According to Mitt Romney, “Getting our fiscal house in order has become more than just an economic issue; it’s a moral imperative.” His solution: “To return the United States to the path of fiscal discipline, America must cut its government spending, cap that spending at a sustainable level, and pass a Balanced Budget Amendment to the Constitution.”
If this is Gov. Romney’s plan, why is he warning about the “fiscal cliff” we are approaching on Jan. 1? Why doesn’t he embrace the spending cuts that are to be enacted?
It’s because Romney and most of those who advocate budget austerity do not really believe that reduced government spending will spur growth. Their rhetoric on defense cuts makes this clear.
The fiscal cliff
The fiscal cliff consists of tax increases and spending cuts mandated by the Budget Control Act of 2011. (This legislation passed in the wake of the standoff between Congress and President Obama over the debt ceiling in the summer of 2011.) In particular, the Act requires that defense and non-defense programs each be reduced by $492 billion from 2013 to 2021 for a total of roughly $1 trillion in spending cuts over 10 years. Tax rates would rise to their pre-2001 levels as well.
The chart below illustrates how the Act reduces the deficit over the next 10 years:
The dark blue bars show the deficit as a percentage of GDP if the Act is enforced. The light blue bars show the increase in the deficit resulting from keeping the Bush tax cuts in place and the grey bars do the same for removing the spending cuts. The green bars add in the extra debt service required by the larger deficits.
Military Keynesianism
Romney singled out the defense cuts as “irresponsible” and vows to prevent them from happening. That’s understandable given his stance towards a strong defense, despite the fact that, according to David Wessel’s new book “Red Ink,” U.S. defense spending is equal to the combined defense spending of the next largest 17 countries.
But that’s not the main thrust of Romney’s opposition to defense cuts. For example, a commercial aired in Ohio asserts that not only will these cuts “weaken national security,” but they will also “threaten over 20,000 jobs.” A similar commercial running in Virginia claims 130,000 jobs in that state would be lost to defense cuts.
Economists call this idea “military Keynesianism.” Defense spending must be maintained at a high level in order to promote economic growth; if you cut defense spending, you throw people out of work. This is exactly what Romney is endorsing.
I find this an odd argument for a conservative to make. (So does the Cato Institute.) In particular, if austerity is a good thing, why doesn’t this apply to defense spending as well?
I think it is because Romney doesn’t really believe in austerity as an economic doctrine. The usual justification for austerity is that reduced government spending will free up resources and promote confidence among households and businesses, encouraging them to work harder and invest at higher rates in new capital. These increases in labor supply and investment spending result in higher rates of economic growth.
Romney’s military Keynesianism throws this aside and adopts the standard Keynesian doctrine that a cut in any type of government spending reduces aggregate demand and causes GDP to fall. It is another argument in favor of a stimulus plan, only this time couched in terms of defense spending.
Romney wants to cut government spending that he doesn’t like, such as unemployment compensation and food stamps, programs that are used by the 47 percent of the population who he says view themselves as victims. This has nothing to do with reducing spending in order to promote economic growth, but is all about an economic philosophy that puts businesses at the center of the economy. As I pointed out in an earlier post, this is an incredibly narrow vision of what an economy is all about.
Eliminate the safety net programs–who would be affected by that?
Of course the poor would be, but so would all of the providers that depend on the government transfers that allow the purchase of their goods and services. The economy slows and everyone who does not already possess wealth becomes poorer.
There are multiple ways of knowing Romney/Ryan are not serious about the deficit.
The first is that the Ryan budget is not balanced until 2040, and the interest payments on the increasing debt is the fasted increasing part of the budget during that period. In fact, a continued deficit is the whip whereby further spending cuts are justified, until government is finally drowned in a bath-tub.
Second, health-care spending is THE major uncontrolled driver of governmental spending at all levels. You cannot be serious about deficit reduction without a serious plan for reducing the rate at which health-care costs increase. Period. End of sentence. Dismantling the only beginning of health-care reform since it was shut down in the Clinton administration is the single most irresponsible act with respect to the fiscal health of the US government that anyone could do. And they promise to do it on their first day in office.
Third, military spending is given a free pass by Romney/Ryan. No cost benefit analysis. No determination of need. Simply “make the US so mighty that no one would dare attack the US”. Can you say “open-ended spending”? Romney/Ryan can.
Defense spending
I have said for years, that without a war to fight this country would go under. Our economy has been based on a war economy since its founding. They are thousands of small businesses that have what appear to be insignificant military contracts, but if we cut defense spending they would be the first to go. For example, I know of a company the has about 20 employees and makes stainless steel urinals for the military, another makes stainless steel mirrors, another makes ammunition boxes. These companies probably have 50 employees between them, but if the military budget is slashed, they are out of business. If you want to fix the economy, start a big war.
Eisenhower
President/General Eisenhower warned of the military industrial complex and we now have it.
Some of the largest corporations in the US are defense contractors or derive a majority of their business from the defense industry. The defense budget has doubled in the past 10 years.
Even the defense department acknowledges there are procurement and spending issues.
For example the DOD can not create a document that shows its budget and where are the money is spent. A DOD auditor came out last week and said the combined ERP budget for the DOD is $8B over budget and estimates it will take 12 years to implement. The auditor suggested the ERP will never be functional. We need to remove DOD spending from the holy grail of no cuts for national defense. Congress gives the Pentagon equipment it doesn’t want, it is called jobs program for the people back home.
Republicans not fit for public office
Just to be totally obtuse the Republicans just vote against stuff. Now they are caught in their own trap. They are now saying they voted against budget cuts knowing sequestration was the next step. What was their rational for voting against it? They say they didn’t think it would get this far. Proof positive rational people have not been sent to Washington. The Republicans are sending you a very clear unambiguous message; they are not fit for the office they occupy. Voters the decision is yours in November.
Thanks for writing so clearly about this inner contradiction in the Romney position.
What Mitt Romney “believes”
This article shows that any efforts to find out what Mitt Romeny really believes are going to be wasted. It’s apparent that he has no “beliefs,” just positions dictated for him by Republican orthodoxy. Cut taxes and spending? Sure, because we’re Fiscally Responsible. Of course, we’re also all in favor of national security, so throwing money at the Defense Department is also a given.
Sometimes, the devil leeches out from the details into the fundamental bases.
There are some things to consider when looking at the political expediency of cutting a military budget. A great way to trim defense budgets is base closures. This not only cuts budgets, but it also hurts the communities that support the base economically (shop closures, etc.) Representatives and Senators will fight tooth and nail to make sure base closures don’t happen to their constituencies. Another way to cut defense is to shut down projects, or not renew contracts with the military industrial complex. This, again, cuts to the economic quick. Shutting down factories means job losses.
As the Republicans have clearly stated, the 2012 election is about the economy. I suspect politicians are leery of cutting defense budgets less because of jingoistic tendencies than the economic pain that it will inflict on some part of the country they represent. It may be more of an effort to keep the politician’s job than defending the U.S. against threats; it’s just sad that no one can articulate this argument. Instead we get scary stories about a defenseless America if we cut one cent from our military budget.