I’m moving on to the second portion of the 99% deficit proposal, this one focuses primarily on spending cuts. As you would imagine the majority of these spending cuts are focused on the military.
Military spending, found in the Department of Defense and other departments, has increased dramatically during each year that George W. Bush and Barack Obama have been president, roughly doubling during the past decade both as measured in real dollars and as a percentage share of discretionary spending. Military and related “security” spending is now at over $1 trillion per year and comprises well over half of federal discretionary spending. It is also very nearly equal to the military spending of all other nations on earth combined. Ending our two most costly wars in Iraq and Afghanistan before the 2013 fiscal year budget would save $1.8 trillion, as compared with ending those wars on the currently planned schedule, with savings of $108 billion per year.
I don’t personally think the time is right to completely pull out of Afghanistan, but otherwise I think this is a fair proposal.
The U.S. should only spend what it needs to defend itself. The military budget can be cut significantly by replacing private contractors, closing some of the more than 1,100 foreign military bases and outposts and eliminating weapons systems many of which the Pentagon says it does not need.
The only major thing in there that I don’t think will save much money is replacing private contractors. Yes, private contractors certainly charge extortionary prices to the military (this is true of the entire federal government). However, in the long run they help keep federal costs down because the federal government doesn’t need to pay for health insurance or pensions for those contractors.
I’d also bring up that moving to completely isolationist policies may not be the best route to take for both our own and global security.
The Sustainable Defense Task Force recommended modest cuts of $1 trillion over the next decade, not counting savings from ending the current wars. U.S. military spending could be cut by 80% and still be comfortably well ahead of any other nation’s military spending. See Creating Jobs and Restarting the Economy below on how these funds could be used to create jobs, restart the economy and provide much-needed services and infrastructure to the country.
I think the 80% number is a bit harsh, I think there’d be a lot of unintended consequences from cutting back that much. Additionally cuts that huge are likely to cost a lot of jobs, and in the short run would likely cause a deep recession.
Corporate tax subsidies through tax breaks and giveaways are a form of spending that needs to be cut. The U.S. needs to end corporate tax subsidies and repatriate overseas funds. According to Citizens for Tax Justice, the 280 most profitable U.S. corporations received tax subsidies amounting to $222.7 billion from 2008-2010. These companies sheltered half their profit from taxes. The result: 30 companies paid less than 0 taxes despite $160 billion in pre-tax profits; 78 of the 280 companies enjoyed at least one year in which their federal income tax was zero or less; weapons maker’s paid a mere 10.6 percent rate in 2010; financial services received the largest share (16.8 percent) of all federal tax subsidies over the last three years.
I think the better thing to do here is go over the subsidies and decide which ones aren’t actually benefiting the public. The rationale behind tax subsidies is that they encourage positive behaviors that may not be properly priced in the marketplace. Clearly accounting fraud and abuses of these subsidies needs to be prosecuted, but theoretically if a firm paid say only 5% in taxes because they reinvested significant amounts of their profits into some action that had significant social benefits, wouldn’t that be an optimal outcome? Now clearly these subsidies have to be done within limits because there is likely a decreasing marginal benefit to most of these actions. I think the bigger problem with subsidies is that they’re not counteracted with taxes against undesirable behavior.
Negotiating better prices with Big Pharma would save more than $200 billion over ten years in pharmaceutical costs. Reforms of Medicare could offer muchlarger savings. Expanding to an improved Medicare for all system would control the cost of health care spending while covering all in the United States reducing significant financial burdens often resulting in bankruptcy and foreclosure.
Negotiating better prices with the pharmaceutical companies could be a good call, although I think it’s worth noting that Medicare Part D wound up costing significantly less than projected because a lot of patents ran out and generics came on the market. So maybe the solution lies in patent reform.
Additionally, while countries with single payer systems aren’t spending as large of a percentage of their GDP, the trend is higher healthcare costs all over. The best way to contain these costs is by switching to a fee for performance rather than a fee for service system.