Wednesday, February 4, 2009

Defense Spending in 2010: Rightwingers Portray Increase as a Cut

Josh Rogin has an irony for us:

The Obama administration has given the Pentagon a $527 billion limit, excluding war costs, for its fiscal 2010 Defense budget, an Office of Management and Budget official said Monday. If enacted, that would be about $14 billion more than the $513 billion allocated for fiscal 2009 (PL 110-329), including military construction funds, and it would match what the Bush administration estimated last year for the Pentagon in fiscal 2010. But it sets up a potential conflict between the new administration and the Defense Department’s entrenched bureaucracy, which has remained largely intact through the presidential transition. Some Pentagon officials and congressional conservatives are already trying to portray the OMB number as a cut by comparing it with a $584 billion draft budget request compiled last fall by the Joint Chiefs of Staff for fiscal 2010.


I’ll concede that a 2.7 percent nominal increase is not a large increase. Whether this represents a real increase greater than 2.7 percent or less than 2.7 percent depends on whether we have deflation or inflation over the year. But what the Joint Chiefs of Staff had requested represented a 13.6 percent nominal increase.

Robert Kagan tried to argue:

Pentagon officials have leaked word that the Office of Management and Budget has ordered a 10 percent cut in defense spending for the coming fiscal year, giving Defense Secretary Robert Gates a substantially smaller budget than he requested.


The rest of Kagan’s op-ed claimed that President Obama wants to cut defense spending. I hear my boss wants to increase my pay by only 3 percent this year so maybe I should go into his office and request a 13 percent increase. That way – I can tell everyone he wants to cut my pay by 10 percent (as compared to my wish list).

If this had been a domestic spending program that got a 3 percent increase rather than a 13 percent increase and some liberal screamed “spending cuts”, one would think Tony Blankley would mock the liberal:

I have been told by sources at the Pentagon that they have been told to not expect full funding of all existing programs. And there is evidence that Obama has apparently been planning to force cuts on our military for some time.


Tony trusts his Pentagon sources? I guess he did not read Spencer Ackerman who first wrote:

Late last week, the White House Office of Management and Budget told the Pentagon to “substantial[ly]” restrain its planned fiscal 2010 budget, which the Bush administration beefed up by $60 billion over the 2009 budget before leaving office.


Spencer added:

Here’s where it helps to have Defense Secretary Bob Gates impose some discipline. Getting eight percent more, outside the costs of the wars (!), during a time of global economic distress is, you know, really generous. An OMB official told Rogin that the Bush-drafted request was a “wish list” for conceivable defense spending — a classy little sayonara to the incoming Obama team — not a realistic budget. Gates has been telling anyone who will listen that the budget is coming down, hard choices are going to have to be made, and people are going to have to stop whining and reconcile themselves to this new reality. So it’ll be interesting to see if he starts with this budgetary gem. But! I hear that he may send OMB a letter objecting to the $527 billion (outside of the wars!) ceiling.


Note that Spencer wrote this two days ago – and yet Kagan misrepresented the story yesterday, while Blankley misrepresented it today.

14 comments:

TheTrucker said...

The free trade problem of our military budget is never discussed. So I want to pose some silly questions for you folks to answer:

1. Who pays for the police on the high seas that prevent the piracy of Toyotas as the Toyotas are shipped from Japan to the USA?

2. Who pays for the defense of Japan proper and So. Korea, and Taiwan?

3. What does the Japanese budget look like in reference to the amount of their tax collections they use for infrastructure, education, Research and development and military?

4. Why do the Chinese not market Nike tennis shoes at one half the current prices of Nike tennis shoes by not sending the Nike corporation (and the shareholders of the Nike name) 50% of the wholesale price of the shoes?

5. Why do the Indians not offer an operating system based on Linux that runs all the software that would run on a Windows OS?

I could ask some more questions but I think you get the drift. The American producers are paying the bill for property rights and sovereignty rights enforcement for all these other nations and for property owned by Americans and physically located offshore. The "owners" of these properties are getting richer and the productive people are getting poorer because of this imbalance of benefits versus costs.

The simple solution is tariffs. the less simple and probably correct solution is a combination of

1. "repatriation taxes"

2. "true fiat money"

3. "true floating currencies"

The "repatriation tax" is applied to goods manufactured offshore that are OWNED by American corporations yet consumed in America. Goods produced by foreign owned brands do not pay the tax. "true fiat money" is the creation of money used to pay for the military and all other government functions and the recovery of that money by taxation within a specific time frame (the depreciation period), or possibly a devaluation of the currency due to not recovering the money. And "True floating exchange rates" will be necessary in that the dollar will be devalued by virtue of government spending on property rights enforcement so as to make imports more expensive and exports more salable.

For right now the "Buy American" stuff in the stimulus is the right thing to do. If it is possible to teach _real_ economics in the high schools and require an understanding of real economics to gain a diploma then it will be possible to do things the right way. Once you enter into a tuition system you will get no real economics.

Nick Rowe said...

PGL: One right wing blogger agrees with you: http://hotair.com/archives/2009/02/02/obama-plans-8-increase-in-defense-budget/

The Man said...

There is no such thing as "buy American" any more. Bush's comment about how americans can help the economy by going out and buying (i.e. going in debt) is bull shit. The greatest outcome of this depression is realizing that he greedy concept of laissez faires capitalism doesn't work. You can spout all the economic terminolgy and arrogant bull shit that you want but the fact remains that an economy based upon consumerism and uncontrilled growth is destined for failure. When right wing economists have to resort to lying and deceipt to get us to spend, to make them richer, then it is just a matter of time before the arrogant, greedy house of cards will fall. I love the fact that these wall street scum are committing suicide. This truly is a "market correction."

Anonymous said...

Suppose Obama tells DoD or Gates or Air Force or JCS the 'DoD will not maintain or buy stuff that is not worth the cost or no more high tech stuff that don't solve any tactical or strategic problems'?

Referring to the Joint Chiefs in the same story as the budget is very misleading.

The Joint Chiefs of Staff (JCS) do not prepare the DoD budget. That is done by OSD and the services.

The JCS is staffed with warriors not accountants, their role in the planning programming and budgeting process is to set the plans, from the president's strategy and fight the wars with the supplementals.

I suspect the figure for JCS strategy has some landmines left for the debate from the right seen here.

JCS plans are far from any kind of budget. They don't have the techies or accountants who are in the service structure. The $584B is a WAG. No link to any rational program and costed effort.

The services have the techies like me and the money folks that do the budgets. Not JCS.

Service budget stuff is rooted in JCS whims, but we have to figure out how to do the jobs and we can do it more efficiently sometimes than even our services think.

The services use the operations and maintenance appropriations to keep force structure "ready" for JCS use. That 'keeping' ready part is much harder lately since the Bushie bureaucracy at the pentagon has had little time for quality which would get in the way of kciking money out of helicopters to the military industrial complex.

I don't know why Gates was kept on, it may be he can corrale the hold overs until they are replaced.

Some of the under secretaries need to go.

All the guy in USD AT&L has been doing is excusing the waste and abuse of the past 8 years, he needs to be gone!

You cannot fix anything if every weapon system is super and worth 3 times the price.

ilsm

James said...

“It’s not really clear what’s going on,” said James Carafano, a defense expert at the Heritage Foundation who says the “supplemental” spending process has been abused. “We have played such a shell game with the American people, they don't know what we are paying for anymore. We can't even have an honest debate about whether defense spending is going up or down.” In a dangerous world, defense spending should go up, not down. If Obama means to do otherwise, the American public has the right to know it before it’s too late.


James carafano

TheTrucker said...

James said," In a dangerous world, defense spending should go up, not down".

Perhaps the best thing to do then is to make the world a lot less dangerous. This is done by getting the Republican morality nose out of the other sovereign nations and allowing them to throw virgins into volcanoes if that is their religious bent. The problem can be addressed if and when the vast universal majority (the actual determinate of righteousness) agrees that the virgin-volcano deal is wrong. That is not an authoritarian unilateral patriotism=religious action. The world is a dangerous place because of Republicans. The Republican leadership feeds off of fear and war. We need real change.

Anonymous said...

James,

The following is an untrue, misleading, platitude:

"In a dangerous world, defense spending should go up, not down".

Is not true and the rest of your ascertion does not follow.

I am in the business of DoD acquisition been here a while ready to retire so don't care if I get caught telling on them.

If the world were so dangerous why not demand performance.

In some very expensive technologies the OT&E fails all the time.

Do you suppose the dangerous enemies are less hard than the OT&E testers?

You are wrong on two counts: one it ain't so dangerous out there; two, the spending does not address the ain't so fearsome dangers.


ilsm

2slugbaits said...

Hold on here. The FY2011 budget is what's being worked now and based on the Pentagon's "Balcony Brief" of optempos there will be significant cuts. It takes a long time to mesh the O&M requirements (which is what Congress funds) with the revolving fund "obligation authority" (which is what DoD uses to procure from vendors). The FY2010 budget was initially developed in FY2008 and you really can't make big changes once those budgets have been locked in. You either understand the DoD budget process or you don't.

The FY2010 budget does represent a cut in real terms. Democrats correctly point out that a nominal increase of 3 percent in welfare spending is a real cut if the number of recipients increases by 5 percent and inflation increases by 2 percent. It's no different with DoD. Materials costs for DoD items have increased at a rate much higher than the CPI; e.g., check out the prices for nickel, titanium, stainless steel, etc. But the real kicker is that the costs of pulling equipment out of Iraq is going to be staggering. Just a few days ago a contract was let to operate a distribution and cleaning facility in Arifjan, Kuwait. It was over a billion dollars with plenty more to come.

Finally, there's a good case to be made for pulling forward the repair and overhaul of equipment coming out of Iraq. That can and should be justified as part of the fiscal stimulus plan. There are shovel ready projects for things that we will have to do eventually anyway. Why not do them as part of the stimulus package now rather than wait until interest rates go up and we're at full employment. A lot of people on the left just can't stomach the idea of more DoD spending as part of a stimulus package, but that makes about as much sense as the goofy Republicans opposing unemployment beneifts as part of a stimulus package simply because they are ideologically opposed to social safety net programs.

Anonymous said...

2slugbaits,

A quibble.

The FY 10 budget is in the appropriation process, is open to major changes. We should see the FY 2010 federal budget when it is sent to congress next week.

'11 and 12 are in POM process.

When I was a young supply guy one of my mentors who did it in the PTO during War Two related the economies of dumping excess and uneconomical equipment in the ocean.

The US cannot affod two occupation armies at once!

Demobilization should start with formations redeployed from Iraq.

Other scarey parts of the DoD outlay profile include added annuitant cash demands, rescission of redux (40% at 20 raised back to 5) and retiree medical. These things increase like other entitlements and come from the annual DoD cash budgets.

ilsm

Anonymous said...

"DoD spending as part of a stimulus package"

Such stimulus is the same as paying men to lean on their shovels.

There are better uses of the resources than maintaining a wasteful war machine that does nothing other than provide income in the many congressal districts.

What did the US get for wearing the wings off the F-16's? Could something better have been made with that $150B? Poking holes through a few trillion miles of sky, burning a lot of fuel creating smoke and noise......

Bruce Webb said...

Trucker I don't know about Korea but Japan certainly pays a big piece of the cost to station troops there. Per the new agreement the total is 140 billion yen per year or about $1.5 billion.

Obviously that doesn't cover the capital costs of the ships and planes stationed there. Then again Japan is not really under any particular threat. Our presence in Japan is pretty much for our own convenience rather than as a real defense for Japan.

2slugbaits said...

Anonymous,

"There are better uses of the resources than maintaining a wasteful war machine that does nothing other than provide income in the many congressal districts."

Perhaps. And if you can find them, more power to you. But there are also a lot of worse policy options, and one of those is not doing enough stimulus spending.

ilsm,

There really isn't a lot of wiggle room in the FY2010 budget. The revolving fund accounts already obligated contracts last year based on anticipated O&M "consumer" dollars becoming available to buy inventory from the revolving fund accounts. If Congress cuts the O&M budgets, then sales from the revolving fund accounts will not cover the disbursements to vendors as obligated contracts are delivered next year. To those of you who are not familiar with the arcane aspects of DoD budget and execution processes, I apologize.

Anonymous said...

ilsm here.

Time to go ubernerd, ala Tanta, on revolving funds:

DoD bought into revolving funds in the late 1980's becasue the Army and Navy could not keep track of expensive personal property (supply) books. The gouge (Navy for scuttlebutt, rumor) is that supply clerks dumped good and repairable parts over the side on the way to port to keep from doing the paperwork. Revolving funds were to save parts and money.

"The revolving fund accounts already obligated contracts last year based on anticipated O&M "consumer" dollars becoming available to buy inventory from the revolving fund accounts. If Congress cuts the O&M budgets, then sales from the revolving fund accounts will not cover the disbursements to vendors as obligated contracts are delivered next year."

If the fund obligated 2009 money to deliver spares in 2010 for approved replensihment that is okay. Cutting O&M in 2010 would only have the effect of building inventory on hand levels.

If the O&M programs go down the effcet is for the "excess" inventory to be a little while in resolving, but eventually the stocks will be sold and the cash balance in the stock fund may rise because it don't need to buy repelenishment inventory as the stock levels declined.

However, I don't see this happening but, if someone orders something based on the revolving funds plans they are what is termed anti deficient. A revolving fund plan is not equal to an appropriation.

Although I have seen a lot of fast and loose with spending money wrongly I have never seen any one anti deficient (spend money for which it was not appropriated).

Cash entering revolving funds comes from sales. If the sales do not occur then the revolving funds do not get cash to order stuff.

I do not know that a 'writ owning' contracting officer would obligate the US Government based on planned sales.

There may be scope on indefinte order contracts (exist to provide venue for fraud waste abuse and bad contract management), that is not obligation, obligation requires delivery orders to obligate the money by definitizing the quantity to order within the scope. Indefinite means a lesser amount of oversight for the order than a new contract. Oversight is good these days!!

Revolving funds are getting fewer, the USAF closed most of its supply and depot management funds for the easier to manage and see what is going direct funding from O&M.

I do not know about DLA and other services.

I used to manage revolving fund business before I sold my soul and became an acquisition puke.

In a revolving fund you start each accounting period with a small 'cash' balance, usually to cover obligations pending from work in process or outstanding personal property orders carried from the last period. This carried over cash is not connected with any year appropriation is authorized in the fund each year by the NDAA, does not need an appropriation because it is revolving.

The bulk of personal property revolving funds include unobligated on order which commits some of the cash balance, inventory on hand and miscellaneous due ins.

What I cannot agree with is that sales declines will have any impact on planned cash, or inventories unless your fund has a turn over of less than 2 times per period.

If you turn over that slowly you should go like USAF and manage direct O&M.

In looking at the composition of a revolving fund I do not see how the congress cuts O&M would impact the funds other than minor and correctable inventory aging slower turnover.

Slower sales mostly affect planned orders.

But those contracts are not obligated until the orders are made.

There may be a case or two where the slow down will cause orders below the minimum of the indefinite contract.

That is why those contracts are bad!!

Let's fix the federal contracting business!!

Anonymous said...

2slugbaits,

"There are better uses of the resources than maintaining a wasteful war machine that does nothing other than provide income in the many congressal districts."

"Perhaps. And if you can find them, more power to you."

Okay.

The "value" of an F-22 deployable "package" is zero to a US farmer, or anyone else within the CONUS, unless that package deploys and protects something in the US.

Extremely unlikely, in any year or decade coming.

But F-22 has a lot of urgency for the little value it provides.

Readiness is about as perishable as oranges.

It costs $50K US to fly an F-22 one hour. Suppose it takes 200 flight hours a year to keep a pilot proficient.

That is a million bucks.

I propose that a million bucks worth of orange juice among preschool kids in Chicago is better value than that pilot's training.

Punch holes through the sky practicing for a fight that would never make a difference.

Same for much of the high tech stuff for fighting past wars and enemies already defeated.

So, I suggest a shipment of oranges for poor kids in Chicago is more valuable than the same money spent on an F-22 package being combat ready for nothing.

In the case of warfare stuff it benefits the suppliers but does not mean much to the customers of the use of the training: citizens.

In the case of the orange juice the providers are paid like the suppliers of the military but the users of the juice get much more than holes punched through sky.