Placer County Navy League

Placer County Navy League
Auburn, California
February 18, 2013

When I visited you a year and a half ago, I spoke of four significant threats to our nation’s defense, the biggest of which was collapse of the finances of the United States Government, which would make it impossible for us to respond to a foreign enemy.

In the time since then, that danger has not only not abated, but it has increased – and increased dramatically. 

The decline and fall of the Roman Empire offers us a sobering warning about a great a nation that became over-extended and war-weary abroad, while at the same time it became utterly profligate at home.  Its economy in shambles and its treasury bankrupt, the mightiest military power on the planet fell easy prey for backward hordes that had previously existed only beyond the fringe of civilization.

Three years ago, Admiral Mike Mullen sounded the alarm for our nation.  He said, “I was shown the figures the other day by the comptroller of the Pentagon that said that the interest on our debt (will be) $571 billion in 2012…That is, noticeably, about the size of the defense budget. It is not sustainable.”  The Chairman of the Joint Chiefs of Staff, a 43-year veteran of the United States Navy, then offered this chilling warning: "Our national debt is our biggest national security threat."

I hasten to add that Admiral Mullin issued this warning three years ago, when our debt stood at $13 ½ trillion.  Today, that debt has grown to $16 ½ trillion --  up almost 25 percent just in those three years. 

Let me put this another way.  In just the three years since Admiral Mullin sounded this alarm, we have added more to this country’s debt than we did in our nation’s first 200 years.  

And I repeat what I said during my last visit here:

“No nation has ever taxed and borrowed and spent its way to prosperity, but many, many nations have taxed and borrowed and spent their way to economic ruin and bankruptcy and history is screaming this warning at us: Nations that bankrupt themselves aren’t around very long, because before you can provide for the common defense you have to be able to pay for it, and the ability of our nation to do so is coming into grave question.”

Admiral Mullen recently reiterated his warning, with added urgency. 

Just in the first four weeks of this year, Congress has added more than a third of a trillion dollars of new spending above and beyond what is already simply unsustainable.  A third of a trillion dollars.

The so-called fiscal cliff deal added $300 billion of new spending (according to the Congressional Budget Office) and the Hurricane Sandy bill – more than 90 percent of which had nothing to do with emergency relief for storm victims – added another $50 billion.  Finally, the so-called debt limit deal passed two weeks ago literally abolished the debt limit, allowing for unrestricted borrowing for the next four months, which will put our national debt around $17 trillion by May.

We are told that we should raise taxes to deal with the debt – but taxes are not an antidote.  Debt and taxes are two sides of the very same coin – in fact, debt is a tax – it is simply collected in the future rather than in the present. 

There is no other way to pay for spending.  Once government has spent a dollar, it has already decided to tax it – the only question is whether to tax it now or borrow it now and repay that debt by taxing later.

If you want to know everything there is to know about what is driving our debt, you simply need to know three numbers: 39, 37 and 64. 

39, 37 and 64.

Thirty nine percent is the combined increase of inflation AND population growth over the past ten years.

Thirty seven percent is the increase in federal revenues.  That’s despite the recession; despite all the tax cuts –and before the major tax increases that took effect in January.  Revenues grew at about the same rate as inflation and population.

The third number is the heart of the problem.  Sixty four percent is the increase in federal spending in the same period.  Nearly twice the rate as inflation and population.

Two years ago, Congress made a half-hearted attempt to address the problem in a measure curiously called “The Budget Control Act.”  I say “curiously” because the “Budget Control Act” authorized the biggest single increase in borrowing in American history – in this single act, the government increased the debt by roughly two trillion dollars. 

But Congress also agreed to reduce the projected deficit by $1.2 trillion over the next ten years – either by a super-committee or, failing that, through an automatic budget reduction called the “sequester.”

I might add that the sequester doesn’t actually cut federal spending in any conventional sense of the word.  After a decade in which federal spending has grown 64 percent, the sequester merely limits the increase next year to one half of one percent. 

I opposed the Budget Control Act that included the sequester and I released an extensive criticism of the measure before the vote. 

I warned that the budget reductions were less than a third of what officials at Standard and Poors said was the minimum deficit reduction necessary to preserve our nation’s triple-A credit rating.  I said, “There is no blinking at the fact that on many occasions in the last month (S&P’s) senior analysts have called for immediate adoption of a credible work-out plan for $4 trillion of genuine deficit reduction in order to maintain a Triple-A rating.  We ignore these repeated and explicit warnings at our peril.”

The measure passed over my objections, it ignored these warnings and just weeks later, the United States Government lost its triple-A credit rating.

I also warned that “(the sequester) would fall heavily and disproportionately on defense spending while leaving general government spending relatively untouched.”  I made two points:

“First, certain aspects of defense spending…are reclassified as ‘non-defense’ for purposes of sequestration, meaning that defense programs could conceivably be subject to both sides of the reductions.
 
“Second, core defense spending has already been subject to significant budget reductions in the last two years, while non-defense spending has been bloated by a parade of stimulus programs.  The (so-called) ‘evenly divided’ cuts therefore begin to look like a contest between a marathoner and a couch potato over who can lose the most weight.”

These warnings also fell on deaf ears.

Twice, the House has tried to address this mistake with legislation to redistribute the sequester reductions with my strong support.  These measures would have replaced the worst of the defense cuts with long-term entitlement reform.  That’s ultimately the only way to bring our fiscal crisis and its spiraling debt under control.

Entitlement reform is the key, because the ugly truth is that if we shut down the entire federal government – that means sending the entire military home; firing every federal employee; closing every federal office – shuttering the White House and the Capitol – “so long, and thanks for all the fish” – that is still not enough to balance the budget.  Because just the automatic spending alone – Social Security, Medicare, Medicaid, Interest on the debt and other social welfare programs -- is consuming more than the entire revenues of the federal government.

Both of these measures to replace defense cuts with entitlement reforms passed the House, but both were killed in the Senate.  And given the political realities after the November election, the likelihood of any entitlement reform over the next several years is exceedingly remote.

Which means that however imperfect the sequester may be, it is at this moment in our history, the ONLY tool currently available to us to BEGIN to point our nation back toward fiscal solvency and away from the perilous fiscal path that we are now on.  

As I outlined in my objections to the BCA two years ago, I don’t like the mindless, across the board cuts mandated by the sequester.  Across-the-board cuts are the lazy man’s path to budget cutting – they treat our highest priorities the same as our lowest priorities. 

There is an effort underway to at least give flexibility to the military command to make more rational decisions of where the budget reductions will fall, and I strongly support this effort.

Ronald Reagan used to say that defense is not a budget issue.  We spend what we have to spend to defend the nation.

That said, I do not understand why we continue to underwrite European defense budgets more than 20 years after the Soviet Union collapsed. 

Our defense budget, inflation-adjusted, is substantially higher than it was at the height of the Vietnam War, when we were not only staring down the Soviet Union, but had 500,000 active combat troops in the field.

Indeed, during World War II, two of the five rings of the massive Pentagon were empty.  There were also far fewer flag officers at the height of World War II than there are today.  We don’t need to squander defense resources demonstrating a “green fleet” – as if we can wage war AND protect the environment!

But we need to be a lot more careful about how we cure that waste than across-the-board cuts – and I hope that will happen.  But the overall budget reductions in the sequester must be realized if we are to have any hope of bringing our spending under control before it destroys the ability of our nation to endure as the last, best hope of mankind.

A few months ago, I met with the chief of the sovereign debt division of Standard and Poors to discuss the sequester.  He made this point: that although the sequester was insufficient to justify maintaining a triple-A credit rating, it was at least a step in the right direction.  He said, “the sequester was an agreement that Congress made with itself, and we would view any step back from that agreement very negatively.”

So I repeat, as imperfect and ham-handed as the sequester may be, and as much as I hope that adjustments can be made to assure the cuts fall on our lowest priority spending while protecting our highest priority spending – the overall reductions must be maintained, and I intend to fight to assure that they are.

Because ultimately, Admiral Mullen was right: that the greatest single threat to our nation’s future security – not to mention its prosperity – is a debt that is completely out of control and that is being driven by reckless spending that is growing at nearly twice the rate of inflation and population growth.

When the history of our era is written, let it not be said that ours was a generation of locusts that consumed not only the wealth we inherited from our fathers and mothers, but also stripped bare the futures of our sons and daughters. 

Let us instead begin a new direction for our nation: stepping back from the fiscal precipice that threatens to destroy our nation from within. 

Our government is divided because our people are divided, but over the last two elections they have spoken clearly and resolutely that they expect spending to be brought under control – that’s why they elected Republican majorities to the House of Representatives, where all spending bills begin.  

It is time the House proved itself worthy of their trust.
 

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