A front page article in the New York Times starts out with the sentence: "The budget that President Obama proposed on Thursday is nothing less than an attempt to end a three-decade era of economic policy dominated by the ideas of Ronald Reagan and his supporters." Not so much.
Ronald Reagan, despite his carefully crafted "small-government" image, and all of the Republican presidents after him, were big-government Republicans. They all increased government spending as a portion of the nation's GDP. In fact, in nominal terms, Reagan doubled the size of government. His ideological heir, George W. Bush, crowed about the benefits of small government, while turning on the spigot for the largest hikes in non-defense spending since Lyndon Johnson's Great Society program. This spending included a $700 billion dollar bail out of banks, which included their partial socialization. So Obama's spending is more of the same, rather than a sharp break with the past.
Taking a lesson from George W. Bush-and many presidents before him-Obama is using a crisis to justify doing other unrelated things. Bush used the tragedy of 9/11 to dupe the nation into an unrelated, unneeded, disastrous, and costly invasion of Iraq. Obama is using the economic meltdown to attempt to achieve expansion of government involvement in health, education, and energy. The $787 billion stimulus package plus all of this extra spending will bring the federal budget to $3.6 trillion in 2010.
The problem is that with the economic stagnation, which slows down the government's tax intake, and fighting two simultaneous and expensive foreign wars, the federal government shockingly can afford only two out of every three dollars it spends. This leaves a whopping $1.2 trillion deficit in 2010 (with Obama's stimulus package and Bush's bank bail out, the deficit in 2009 is an even more humongous 1.75 trillion). Add to this Obama's overly optimistic economic forecast (common among presidents, who usually want to make the federal budget projections look better than they are) and upcoming entitlement crisis in which the Social Security and Medicare systems become insolvent, which make Obama's promise to eventually halve the post-World War II record deficits (even bigger than Reagan's red ink) difficult.
To reduce the deficit, in 2009 standing at an amazing12 percent of GDP, Obama will need to look to the non-entitlement portion of the budget, which is called the discretionary spending. The Social Security, Medicare, and Medicaid entitlement programs are examples of the government on autopilot-and are very difficult to reduce.
More than half of the discretionary budget is defense spending (slightly less than $700 billion per year), making it a big and deserving target for cuts. Actually security spending-which in addition to defense spending should include the budgets of the State and Homeland Security Departments, the Veterans Administration, and the interest on the national debt that arises because of such security spending-is yet a third higher, coming in at almost $900 billion. All of these departments should also be cut back.
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But since defense is by far the biggest chunk, let's focus on that huge pie. During the George W. Bush years, even after the Cold War had long ended, national defense spending ballooned a whopping 78 percent. Recently, Congressman Barney Frank (D-Mass.) made the bold proposal to cut defense spending 25 percent. That sounds about right, and here's how to get started on achieving that goal.
Obama has proposed withdrawing all combat forces from Iraq by August of 2010, but this only seems to save about $14 billion because he is leaving them in Iraq three months longer than his campaign promise of a 16-month withdrawal, is retaining as many as 50,000 troops in that country and simply re-labeling them into "non-combat" roles, and is simultaneously escalating the war in Afghanistan. He should withdrawal from Iraq faster and abandon the nation-building quagmire in Afghanistan, which is only inflaming anti-U.S. Islamism in Southwest Asia and the rest of the world.
Even more boldly, Obama should realize that with the economic meltdown, we can no longer afford the expansive U.S. overseas empire. By withdrawing from Iraq and Afghanistan and vowing to end imperial policing and nation-building, he could scrap the expensive plan to increase the Army and Marine Corps by 92,000 troops. Personnel costs already make up two-thirds of the Pentagon's budget and adding people is expensive.
In addition, Obama should make each of the services cancel major unneeded or excessively expensive weapons systems. Here are some suggestions: The Air Force's tanker aircraft and F-22 fighter, the Navy's Littoral Combat Ship, the Marine Corps' V-22 tilt-rotor aircraft for transporting troops, the Army's Future Combat System (a fleet of fighting vehicles needed for fighting a future great power rival, which doesn't exist), and the Joint Strike Fighter, a fighter that the Navy, Marine Corps, and Air Force are working on together.
Although Obama's promise to eventually cut the deficits seems problematic with all of the added stimulus and other spending, surprisingly most modern day Democratic presidents have been better at cutting deficits and government spending as a portion of GDP than Republicans, who usually increase government spending as a portion of GDP, thus rendering their perennial tax cuts to be fake. Because Obama has a tough row to hoe to equal his Democratic compatriots Jimmy Carter and Bill Clinton at deficit reduction, he needs to start with big cuts in the defense budget.