Choosing the Nation's Fiscal Future (2010) / Chapter Skim
Currently Skimming:
7 Options for Defense and Other Domestic Spending
7 Options for Defense and Other Domestic Spending
Pages 129-142
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From page 129... ...
The total of spending on these programs is higher than that for Medicare, Medicaid, and Social Security combined and under current policies is projected to remain so until 2014. Although we group all of these spending programs under the single heading of "defense and other domestic spending," that heading hardly captures the range and diversity of the important public missions they represent.
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From page 130... ...
Examples include food stamps, benefits for disabled veterans, federal spending on unemployment compensation, cash refunds from the Earned Income Tax Credit, and federal civilian and military employee retirement payments. Examples of non-entitlement mandatory spending include Temporary Assistance to Needy Families and some payments to farmers and for deposit insurance.
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From page 131... ...
In this chapter, we present a wide range of alternative levels of defense spending, reflecting not only conflicting views about the best use of defense resources, but also fundamental differences regarding the role of the United States in preserving world peace. Defense and other domestic spending is not projected to grow as a share of GDP under the study baseline.
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From page 132... ...
Consistent with the notion that there can be multiple paths to fiscal sustainability, this chapter discusses options for defense and other domestic spending that run the gamut from deep cuts to significant expansions (all relative to the study baseline)
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From page 133... ...
infrastructure, credit support for defaulting homeowners, and extended unemployment and health benefits. Spending also was swelled temporarily by extraordinary interventions to stabilize financial markets, the government's assumption of responsibility for Fannie Mae and Freddie Mac, and aid to floundering banks and auto companies.3 If the economy recovers as projected, other domestic spending will fall back to about 6 percent of GDP in 2010 and then drift down to just over 5 percent of GDP by 2019, remaining around that level from 2020 on.
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From page 134... ...
The two options intermediate to the lowest and highest spending ones illustrate additional ways of apportioning resources within the defense and other domestic spending category. The first intermediate option (Option 2)
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From page 135... ...
Option 1: Cut Spending by 20 Percent Option 1 makes deep cuts to defense and other domestic spending, putting overall spending 20 percent below the study baseline by 2019 and, at 6.9 percent of GDP, considerably below the 8.6 percent share of 2008. This represents a reduction (relative to the baseline)
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From page 136... ...
may overstate the effect of inflation on households because it does not account for the adjustments that people make in their spending patterns to compensate for changes in the relative prices of different goods and services.7 The Bureau of Labor Statistics has calculated an alternative measure of inflation, called the chained CPI, which does reflect such consumer behavior.8 A chain-linked CPI for cost-of-living adjustments for indexed programs would reduce the growth of benefits for a number of the other mandatory programs, chiefly federal civil service and military retirement, veterans cash disability benefits, railroad retirement, and Supplemental Security Income. The Congressional Budget Office furnished the committee with an estimate of the savings that would result by 2019 from using a chain-linked CPI for cost-of-living adjustments for indexed programs.9 Additional Unspecified Cuts in Domestic Programs The specified cuts discussed above would put domestic spending approximately 7 percent below the baseline by 2019.
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From page 137... ...
Reductions of this magnitude, while preserving essential funds to adequately support the military forces, will eventually result in demands to recapitalize weapon systems and equipment and increase the operating costs necessary to maintain existing assets at any acceptable state of readiness. With such reductions, U.S.
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From page 138... ...
Sustaining the present personnel and support policy emphasis would likely maintain the national capacity for rapid military deployment but have implications for defense-related investment, research and development, and construction projects that are similar to Option 1, albeit less pronounced. Option 3: Increase Spending by 5 Percent This "pro public investment" option expands overall category spending relative to the baseline.
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From page 139... ...
and remain at approximately that level from 2020 on. Option 4 expands defense spending by approximately 24 percent relative to the baseline, putting it at 4.2 percent of GDP (close to its 4.3 percent
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From page 140... ...
Defense Programs This option expands defense spending by approximately 24 percent relative to the baseline, putting it at 4.2 percent of GDP in 2019 and keeping it approximately at that level from 2020 on. This is slightly below the 2008 level of 4.3 percent (which includes temporary war spending)
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From page 141... ...
from which the committee identified illustrative budget savings contains arguments for and against each of the options.
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