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America: Produce Defense, Not Retirement

It may be a baby step, but the decision to cut some personnel benefits in the National Defense Authorization Act shows that at least some defense hawks recognize what a combination of the sequester spending cuts and soaring personnel costs means for national defense.

Two weeks ago at a Bipartisan Policy Center event, former Under Secretary of Defense Michèle Flournoy candidly stated that the preliminary national defense review she helped author, “shows that under the sequester caps in current law, America cannot meet its strategic defense needs.” Former Under Secretary of Defense Eric Edelman, who shared the stage at BPC and is also an author of the review, outlined the clash between rising defense personnel costs and spending on modernization, readiness, training, and research.

Perhaps the nomination of Ashton Carter as Defense Secretary will accelerate re-consideration of the so-called “sequester caps” in Fiscal Year 2016 under the Bipartisan Budget Act passed almost a year ago.

Our view has never varied. The sequester caps on defense and non-defense discretionary spending should be repealed. The growing fiscal tension facing America is the result of a fundamental mismatch between our tax code and entitlement spending on Medicare, Medicaid and Social Security.

All the sequester has done is cut the slowest-growing government programs that provide for our future well-being and include health research, education, infrastructure, and other investments in economic growth. These accounts comprise less than one-third of the federal budget. CBO projects that within 10 years, costs on federal debt will exceed defense spending. The result of the fiscal status quo, then, means an operation (government) that is investing less in future production, increasing debt faster than income, and cutting one of its primary commitments (national defense).

If this analysis was applied to a company, most analysts would advise against buying the stock. It’s unfortunate that is where federal fiscal policy is taking us.

If either the lame duck session or the 114th Congress fail to summon up the courage to reduce the rate of growth of both defense and non-defense entitlements, America may become like the old joke about American carmakers: “Large retirement programs that once in a while produced a car.”

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