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Responses to Comments – Round One

It is my pleasure to respond to the many interesting responses I have received to my posting on Angry Bear. I’m starting with responses to the 18 comments on the initial announcement of my visit. Tomorrow I will respond to the dozens of comments on my first post. Thanks for your patience — you are an active group and I’m trying to keep up.

Coberly is correct. We should not cut Social Security to pay for a war. My concern about the growing outlays from Social Security, Medicare and Medicaid is that if they continue on their current trajectories they will swamp all other programs in the budget — and lead to higher interest rates and higher taxes, and since the tax that pays for Social Security is the Payroll tax — which is very regressive –- it will hurt low and middle income wage earners. I favor cutting a lot of non-essential domestic programs before cutting Social Security and Medicare benefits, but I am afraid that at some point we will need to find a way of increasing inflows into such programs — preferably from high income earners, and curbing the growth benefits to upper income people to make these programs sustainable for those who really need them.

This would have to be done even if the Defense Budget were zero. But because it is not zero, and we still will have international and Homeland Security expenses well after the Iraq War, this is yet another reason to put these programs on a more sustainable basis. And I also agree with Coberly that Social Security is less than 5% percent of GDP now; in fact it has a surplus now. The issue comes toward the end of the next decade; my book The Price of Liberty describes this concern in its last chapter. I want to be sure there is money for our elderly and medically needy; that is essential. But I also think we need to make sure there is also money for our national security. That will require some better long-term planning than we are seeing today.

To Dale: Thanks for making the point about waste in military spending. This needs to be corrected, as does the earmarking of defense and homeland security projects. Correcting these things are both good economics and good for national security in that it will strengthen the credibility of the funds that the Defense Department and the Homeland Security Department do ask for. And as for an attack on entitlements, as I mentioned to Coberly, I do not attack entitlements. I want to put them on a sustainable basis for those who need them. And to do so we need to look ahead. I am sorry I was not clearer on this. It should not be a zero sum game. All programs, military spending and entitlements need to be looked at to be sure that the funds are well spent; entitlements need to go to those who need them. And those who do not should do with a little less.

To Sammy: Good point. I think that asking Americans to make sacrifices for any war does two things; one, it gives citizens a vested interest in the war, as was the case in World War II and it avoids hiding of the war, as was the case in Iraq and Vietnam. All I am asking for is an honest dialogue with the American people on what a war costs — so they understand that it cannot be financed by sleight of hand. That would enable Americans to make an informed decision as to whether they want to make sacrifices to support their troops — which most Americans will — and our leaders to have a more direct dialogue with Americans. Skirting the budget issue neither promotes an open dialogue nor enables Americans to determine what the war will actually cost them. Since no war is free, understanding the cost at the outset is good politics and good for a democracy.

To Patrick R. Sullivan: We do have bonds today, since much of this war is paid for by borrowing, but we do not have a candid presentation about how much of our current borrowing is war related, tax cut related, or for other things. In fact, it is for all of them. But because borrowing can be done relatively easily at relatively low rates it looks easier than borrowing for past wars.

To PGL: Very well put. Better than I could have done myself. If we do not pay for our war, the cost is passed to the next generation. And you are also right on Social Security; the Social Security Surplus is disguising the actual size of the deficit and making the war easier to finance because it disguises its cost and indeed the cost of running the entire government. I describe this in greater detail in the last chapter of my book; the Concorde Coalition also highlights it. I am concerned about deficit financing not only for financial reasons — although that will be a huge problem in the next decade when the costs of entitlement and discretionary spending and interest payments are added up and compared against the inflow of revenues — but because it is a horrible legacy for coming generations. In my book, I cite a wonderful quote from George Washington’s farewell address in which he warned against “ungenerously throwing upon future generations the debts we ourselves ought to bear.” That goes for us too.

To Ken Melvin: I am not sure whether we are spending too much for these programs or not, but we should certainly take a hard look at them through the use of Congressional oversight — as in the case of the Truman Commission during World War II. My concern is that we are not spending some of the money smartly. And a lot of stuff is added by Congress for local constituency benefits which is not needed — or put into Homeland Security not on the basis if risk but for more political reasons.

To Sammy: I do care that some Social Security and other benefits go to people who don’t need them. Correcting that should be one part of the reform process.
Coberly asks some additional questions about the cost of future entitlement programs. All these are valid. The best way to get the answers is from the reports of the Trustees of Social Security and Medicare and from groups such as the Concord Coalition. These numbers are very similar — and these are the figures I cite in my book. One key point is that borrowing from the Social Security Trust Fund now finances a substantial portion of our budget deficit. This misleads Americans into thinking that the deficit is lower than it really is. But when the surplus turns to a deficit in the next decade that will change.

To Josh G.: I am not arguing to slash social programs to pay for the military. They should be put on a more sustainable basis for their own internal reasons of keeping faith with the people who will need them in coming decades. These numbers didn’t come from me; I got them from the people who run these programs. And, on another point, I think that terrorists do represent a threat — not only the ones in caves but the ones who are planning attacks here and on our allies.

To Lysistrada: I am not suggesting using the payroll tax to finance the military budget. Soon it will not even cover the costs of the Social Security System. Also, I do not believe and did not believe at the time that we needed a tax cut for people in the upper income bracket — and if one were to be passed I did not think it should last for ten years. And I have been all in favor of raising the minimum wage. But regarding FDR, he did cut programs for a lot of middle income people; many New Deal programs were cut during World War II. But I am not suggesting that now. I am not suggesting that any programs for low or middle income people should be cut; my discussion of Social Security and other reforms goes to the point of ensuring that they are around for coming generations for those who need them. And there are risks if they are not reformed; even with a zero defense budget that would be needed. Please read the reports of the people who run these programs and look at the numbers and look at the reports of the bipartisan Concord Coalition. And then let’s discuss this further.

Thank you all very much for your contributions. More responses will be posted tomorrow.

How Not to Pay For a War

I’d like to thank the team at Angry Bear for giving me this opportunity to answer questions about my new book, “The Price of Liberty: Paying for America’s Wars.” If you haven’t gotten a chance yet, I encourage you to read the Outlook piece I wrote for the Washington Post on May 6. This piece contains a few ideas distilled from my book. The Post has been kind enough to let us circulate it.

There’s a popular post on this blog called “How Not to Run a War.” Taking a cue from that, I want to briefly talk about “How Not to Pay For a War.”

We shouldn’t pay for a war by INCREASING spending on non-essential domestic programs, particularly by increasing spending for “earmarked” politically inspired projects meant to satisfy domestic constituencies. In every war of the past, our government has cut non essential spending to make room in the budget to pay for the war. Not this time.

We should not pay virtually the entire cost of a war with “emergency supplementals” which skirt the normal budget process and thus avoid the normal scrutiny of determining what is really needed and what the tradeoffs are; even during the unpopular Vietnam War the use of supplementals was limited after the first couple of years.

And we should reflect in this post-Memorial Day period on a situation in which most Americans have been treated to tax cuts and many benefit from domestic spending for politically-inspired projects and generous subsidies while Americans fighting abroad and their families are making major sacrifices. That is unfair and unjust, and not consistent with the best traditions of America. No matter what one thinks of the war the troops should be well equipped, our wounded veterans should be given the best of care, and military families should be given the help they need to live at decent standards while their breadwinners are fighting abroad.

The challenge now is to learn from our mistakes and take them into account as we as a country determine how to pay for the longer war against terrorism and to be sure that the US remains financially resilient enough to counter future threats to our well being — whether from a catastrophic act of terrorism, foreign crises that may erupt in areas such as the Middle East that threaten our allies or oil, another devastating hurricane or a major pandemic.

So how should we prepare to pay for our future security over coming years? It won’t be easy given other demands on the budget, particularly projections for the rapidly growing costs of Social Security, Medicare and Medicaid in the decade ahead.

And how do we meet the costs of these programs and our national security requirements without producing massive budget deficits and/or huge tax hikes? Or are these unavoidable?

I have some thoughts on these issues, which are included in my book and which I am looking forward to discussing on this blog tour over the next several days, but my major objective is to develop a dialogue in the hope that thoughtful people of various views can come up with sound solutions.

I welcome YOUR thoughts on these questions and promise to respond as soon as possible. Many thanks for joining me in the quest for answers to these difficult but important questions.

Bob Hormats, Author,
“The Price of Liberty: Paying for America’s Wars” (Times Books)