Archive for March, 2009

Limits on the Health Care Deduction?

The Obama administration is open to the idea of limiting the deduction on employer-based health care coverage. This would be a tremendous step in the right direction in limiting health care cost growth, as I’ve previously discussed (here as well).

While President Obama campaigned against this proposal initially, his advisers now indicate that he will not oppose a reduction in this subsidy if Congress passes it. Let’s hope that this particular initiative survives the Congressional melee and emerges as part of health care reform!

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US Defense Spending Is Out Of Control

In the federal budget, there are three untouchable categories of spending: Medicare, Social Security, and Defense. Which of these expenditures has grown fastest over the past decade? While the media is constantly pointing to runaway healthcare spending, defense spending has grown at 10% per year in the past decade, faster than any part of the budget. The Korean and Vietnam Wars were fought on 2/3 the current defense budget, and those were much larger conflicts than Iraq and Afghanistan! In his proposed budget, President Obama has indicated that he will attempt to make defense spending more efficient. Nonetheless, the budget shows defense spending rising from $600 Billion this year to nearly $700 Billion by 2019.

US defense spending during the Cold War (1946-1991) averaged $400 Billion per year in 2008 dollars, including both the Korean and Vietnam wars. By comparison, the 2008 defense budget including the Iraq War and troop surge was $676 Billion. It’s absurd enough that we defeated the Soviets with a much smaller military budget, but proposed budgets increase spending further, when the winding down of the Iraq war should enable a $100 Billion dollar decrease.

Winslow Wheeler at the Center for Defense Information notes that the military budget has doubled while the quantity of weaponry and quality of military readiness has actually declined. Department of Defense accounting is so poor (perhaps intentionally?) that the DoD has no idea how much money is really spent on its weapons programs. Rather than increasing the defense budget, President Obama should consider freezing it at the 2007 level for the balance of his presidency. This would eliminate almost $1 trillion in deficit spending, and would finally force the DoD to focus on accountability and efficiency. A $600 Billion defense budget is still triple that of our potential adversaries’ defense budgets combined, and would ensure our safety while forcing fiscal discipline on an untamed federal department.

Sources:

[1] $258 Billion in 1998, $676 Billion in 2008 = 10% growth per year. Health care spending and social security also rise rapidly over the same period, but neither grew at this rate. See the following links for data:

http://www.defenselink.mil/comptroller/afr/fy2008/Fiscal_Year_2008_Department_of_Defense_Agency_Wide_Financial_Statements_and_Notes.pdf – Figure 1-5 and 1-6 show actual expenditures for 2008

http://www.gpoaccess.gov/usbudget/fy09/pdf/budget/tables.pdf

http://www.gpoaccess.gov/usbudget/fy00/pdf/budget.pdf

[2] $676 Billion in 2008 vs. $400 Billion per year in 2008 dollars during the Cold War including Vietnam and Korea

http://www.cdi.org/Issues/milspend.html

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