- The Washington Times - Saturday, November 12, 2005

As Congress struggles to complete work on the 2006 budget, the White House tells the Pentagon to cut between $13 billion and $15 billion from the 2007 defense budget and billions more in coming years.

The military is in combat in Iraq and Afghanistan, has what Robert Kaplan calls “imperial grunts” in scores of countries fighting terrorism and protecting American interests and must prepare against increasingly dangerous and assertive rogue states, unstable alliances and rising or resurgent powers. The Bush administration proposing defense cuts raises serious questions about both its fiscal policy and military strategy.

The administration wants to reduce the budget deficit while continuing to cut taxes. Even though the Office of Management and Budget (OMB) has forecast a $341 billion deficit for 2006, Republican leaders are still considering a new tax cut package of up to $70 billion.

But mandatory social-welfare spending is projected to account for 56 percent of outlays in 2007. The president himself made this worse by pushing through a new Medicare prescription drug benefit, which the Heritage Foundation estimates will cost $37.4 billion in 2006 and $52.5 billion in 2007. Mandatory spending increases squeeze so-called discretionary accounts that fund the legitimate core functions of government, including national security, infrastructure and disaster relief.

With no political will in Congress to roll back the mandatory programs, restrained nondefense discretionary spending will not balance the budget. There must be a realistic look at the revenue side. According to the OMB, tax revenue in 2004, 2005 and 2006 averaged only 17.1 percent of GDP, the lowest since 1959. Even at the height of the Reagan tax cuts of 1983-86, tax revenues averaged 17 percent of GDP.

The OMB says the 40-year average for tax revenues is 18.2 percent of GDP. OMB projections show tax revenues remaining below the historic level beyond 2010, with continuing deficits.

In supply-side theory, tax cuts stimulate economic growth. The tax base then expands so revenues are maximized at lower rates. This seemed to work during the Reagan administration. For nonrecession years 1983-1989, tax revenues rose 65.2 percent. But looking at the same number of years as projected by the OMB, 2003-2009, tax revenues will only increase 48 percent. For an equivalent period of the Clinton administration, when tax rates were higher, revenues for 1993-1999 went up 58.3 percent and produced a budget surplus.

It is possible to overtax an economy and slow economic growth. It also is possible to undertax it and thus not harvest the benefits of growth. President George W. Bush has weakened, not strengthened, the government fiscal structure.

He has also failed to strengthen the military, which was drastically downsized by more than a third in the 1990s. The false notion the post-Cold War world would be a “new order” of harmonious globalization misled the Clinton administration into thinking the military establishment built during the Reagan administration would no longer be needed. Yet, for inexplicable reasons, Defense Secretary Donald Rumsfeld has resisted all congressional Republican efforts to rebuild forces.

Searching for the minimal force in Iraq, and failing to plan for the postinvasion reconstruction, were attempts to fight the war on the cheap. Military history indicates this often is the most expensive option in the long run. And much of the extra cost is paid in blood, as enemies manage to rebuild and exploit weak spots in our overstretched forces.

But Iraq is not the only problem. Cutting big-ticket items such as fighter planes and destroyers appeals to bean-counters obsessed with terrorism at the low end of the conflict spectrum. Terrorists are dangerous, but weak. The real threats to U.S. pre-eminence come not from cave dwellers but other nations with resources only governments can muster for regional or global challenges. It is essential to maintain American superiority at the high end of the spectrum, from research lab to factory floor to the battlefield.

The Navy, for example, has been studying the minimum number of warships it needs to fulfill its global role as the vanguard of U.S. power projection. The number appears to be 310 to 320, but current shipbuilding plans are insufficient to keep the fleet from declining further below its current 281 ships.

The Bush administration seems unwilling to mobilize the resources needed to carry out its ambitious (and worthy) foreign policy agenda. In Tehran, Beijing, Moscow, Pyongyang and other capitals, the “shock and awe” of the initial Iraqi blitz has worn off. America’s rivals have always told themselves Washington lacked the long-term commitment to maintain its world leadership. Their only hope to prevail is if the United States proves to be a decadent society whose wealth is a source of weakness rather than of strength. If a Republican administration fails to rebuild the military, what hope do our soldiers have?

William Hawkins is senior fellow at the U.S. Business and Industry Council.

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