This is important because everything which sustains the military (money, personnel, and technology) comes from the economy, not government. Government only allocates those resources and sets policy, the economy creates the resources. I think our generals and defense secretaries might have forgotten this important point. If America is the economic engine of the Western world then those professionals who defend it should know how that engine works.  

This is why I stand on my Townhall soapbox and preach to the few readers who stumble in here about the dangerous road our government is taking. If I’m becoming a one-note blog, so be it. I can’t think of anything more important to talk about.  

The mainstream media (MSM) is talking about the mounting pressures to cut the defense budget based on the slowing economy and massive bailout spending. I point to the two articles below as examples.

From the 10 November Boston Globe:

A senior Pentagon advisory group, in a series of bluntly worded briefings, is warning President-elect Barack Obama that the Defense Department's current budget is "not sustainable," and he must scale back or eliminate some of the military's most prized weapons programs…It contends that the nation's recent financial crisis makes it imperative that the Pentagon and Congress slash some of the nation's most costly and troubled weapons to ensure they can finance the military's most pressing priorities…

And a few cuts here or there won't do the trick, they add. "Taking cuts at the margin won't work this time, nor will pushing things off to later years."
     

And this is the 3 November New York Times:  

After years of unfettered growth in military budgets, Defense Department planners, top commanders and weapons manufacturers now say they are almost certain that the financial meltdown will have a serious impact on future Pentagon spending.

Across the military services, deep apprehension has led to closed-door meetings and detailed calculations in anticipation of potential cuts. Civilian and military budget planners concede that they are already analyzing worst-case contingency spending plans that would freeze or slash their overall budgets...

In all, the Defense Department now accounts for half of the government’s total discretionary spending, and Pentagon and military officials fear it could be the choice for major cuts to pay the rest of the government’s bills…

Some critics, citing the increase in military spending since Sept. 11, 2001, say it would be much easier to cut military spending than programs like Social Security and Medicare at a time when most people’s retirement savings are dwindling because of the financial crisis. Representative Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, has raised the idea of reducing military spending by one-quarter.

I’m glad the MSM is finally paying attention to the subject, but I think they’re missing the real point. It’s not that the current spending spree and recession will hinder defense spending; its quite possible America might be wrecking her currency and economy to the point we cannot sustain basic government functions like defense at all. If you think I’m exaggerating, read this article from CNBC:

The United States may be on course to lose its 'AAA' rating due to the large amount of debt it has accumulated, according to Martin Hennecke, senior manager of private clients at Tyche…"The U.S. might really have to look at a default on the bankruptcy reorganization of the present financial system" and the bankruptcy of the government is not out of the realm of possibility, Hennecke said…In order to solve or stem the economic slowdown, Hennecke suggested the US would have to radically reduce spending across all sectors and recall all its troops from around the world. As for a stimulus package, there is not much of an industry left to stimulate back into life, Hennecke said.

Tyche, a respected international finance corporation, goes further in this online article, “The Coming Cash Crash” by comparing the US to Zimbabwe. Both nations are destroying their currency with out of control debt and by relentless currency printing. In Zimbabwe it resulted in reduction of its national bonds to less than AAA status and panic selling of its debt and currency. Bankruptcy. 

America’s bankruptcy is a real and imminent possibility. What happens in a bankruptcy? Simple, an entity is reorganized in a way which allows it to function in the best interest of it creditors. Who are America’s creditors? I’ll let the reader answer that one and then ponder this question…

Can a bankrupt nation defend its international interest at home and abroad?

Few alive can recall when our nation faced such unsettling times. Servicemen watch the financial turmoil battering our nation with grave interest. Obviously, their most immediate concerns are how the crisis affects their wallets. However, in recent days I’ve been approached by concerned young officers asking, “How will this impact the military?” They’ve been at war for years and now another level of uncertainty has been dropped upon them. They understand the military doesn’t exist in a vacuum and are hungry for straight answers.

The straight answer is the budget outlook is grim, won’t get any better, and it will effect defense.

The short term outlook is dark. According to February 2008 Office of Management and Budget (OMB) estimates, the government took in about $2.6 trillion and spent about $2.9 trillion.  That resulted in an annual deficit of almost $300 billion dollars, or roughly the equivalent of half the defense budget. Add that to America’s growing 10 trillion dollar debt, a conservative estimate. (It’s important to note these OMB figures assumed a healthy economy and unemployment under 5%.)

Those February assumptions are now worthless. The feds just spent over $850 billion of money it doesn’t have to save the global economy. Unemployment raced to 6.1% and most agree we’re heading into, at minimum, a deep recession. Tax revenues will fall and the pool of money available for the federal government to borrow will shrink in the face of the deepening global credit crisis. This year’s deficit has doubled and may top one trillion dollars before all is said and done. This bodes ill for a nation at war.

The Pentagon budget would face substantial challenges even in the best of times. The Navy and Air Force are struggling to modernize Cold War era equipment while the Army and Marines must grow and replace equipment worn out by a decade of combat. Healthcare costs are rapidly eroding the defense budget from within. Seldom has the need for defense dollars been so great, nor has the budget outlook been so bleak.

The long term outlook is even darker.

Many in the military have never heard of Mr. David Walker. He was U.S. Comptroller General under Presidents Clinton and George W. Bush.  As America’s former senior bookkeeper his message to America is simple: we’re way over our head in debt, it’s getting worse, and time is running out. Here’s why.

If one took the 3 trillion federal budget and condensed it into one dollar, defense spending would be about 20 cents. Mandatory spending, mostly interest on the national debt and entitlements, take about 50 cents; by law these take precedence over everything else, including defense. Starting in 2010 mandatory spending will begin to devour the entire dollar until, somewhere between 2020 and 2030, there will be no revenue left over for defense or anything else. Even worse, these OMB estimates are based on rosy economic forecasts and don’t account for anything approaching the scale of our current crisis.

I believe global economics and the colossal pressures on the federal budget are the true defense issues of our generation. Our entire strategic outlook must revolve around this new reality. Leaders of every service should level with us about the impact these challenges will present in the coming years.

Entitlements have not drained the economy because they drained the only part of federal spending that Washington was willing to reduce: defense. This was endurable because conventional threats were decreasing - primarily due to a strong defense commitment. However, as Sept. 11 demonstrated, reduction can not be an indefinite exercise.

...Despite a tax system more onerous than anyone now is willing to countenance, the taxes raised are insufficient to sustain entitlements and the rest of the federal budget...

...For many the entitlement tidal wave is a new story. In fact, it is merely the retelling of an old one. Both stories reach the same conclusion: uncontrolled spending. There is no longer a silent spending cut to offset entitlements and even the most draconian of tax codes and tax levels can not produce enough revenue to support it and the rest of the federal government.

Last week the US Government absorbed almost a trillion dollars of the most noxious corporate debt imaginable. To put it in perspective, the government has an annual operating budget of about three trillion dollars and only takes in about 2.7 trillion in revenue. This new debt is equivalent to almost three annual defense budgets! Overnight, the US federal debt leapt by at least a ten percent. Whatever budget estimates and expectations Pentagon leadership had up to this point can be thrown out. It’s a new fiscal ball game.

In my article, “Entitlements Threaten Defense Spending” (Townhall Magazine, September 2008) I likened entitlement spending, like Medicare, to a tsunami of red ink poised to crush the defense budget. With this week’s unprecedented corporate bailout packages our nation effectively ran out to meet that giant wave.  If the republic is to survive something will have to give.

That something will be defense, the biggest slice of the non-discretionary federal budget. Congress and the next president will have to cut federal spending in order to service this new debt. If they don’t, they risk potentially destroying America’s currency and credit rating – bad, very bad. 

Those staffers will tell the Pentagon budget planners (those working on something called the ‘POM’) to start planning deep cuts. They’ll give these planners draconian bottom lines and tell them to meet them - period. The planners will start a series of budget drills and the real fun begins.

Over the next few months rumors of the deep budget cuts will seep outside the Pentagon. Small programs, big programs – nothing will be sacred. The defense budget will be so different next year it as to be almost unrecognizable.

The Air Force will get hit hardest since it’s currently the least favored branch among the political elites. Since the new aerial tanker was punted to the next administration it’s uniquely vulnerable. I believe by this time next year it will be on indefinite hold and some token funds will be thrown at the old KC-135 to extend its life a few more years.  Don’t hold your breath on a new replacement rescue helicopter. I believe that program is doomed now. Expect early retirement for various weapons systems those with high operating costs, perhaps like the B-1 bomber.  

I cannot speak to the specifics of the other services, but they’ll get hit hard, too. Even the Army and the Marines, the most engaged in combat operations, will feel the heat. It won’t just be weapons acquisition programs, either. Personnel program cuts will be close behind.

I’m not talking about tweaks in the system, but sudden and draconian cuts. It will start with pronouncements on cutting travel costs. Then they’ll cut medical costs in new and painful ways. Tricare will eventually pay pennies on the dollar as co-pays for dependant medical care skyrockets. There will be drastic rollbacks in retiree medical benefits and huge shake-ups of the retirement system itself. Then the real cuts will begin.

The Navy and Air Force will resume their downward force cuts to unprecedented levels, perhaps in the range of 250,000 for each service. The additional forces added to the Marines and Army since 2003 will be rescinded. There may even be serious consideration of consolidating the services. I believe in 3-5 years we’ll find the military 25% smaller…at least.

With all these force cuts, how will we fight the wars in Iraq and Afghanistan?

We won’t. With this new, staggering debt load members of both political parties will accelerate our departure from Iraq and even Afghanistan, regardless of the political and military consequences. Only a token naval and air power component will remain in the Gulf Region to protect the oil. Expect withdrawal of forces from most of the Pacific and Europe as well.