Hot Spots

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Hot Spots

12/06/2012

The Fiscal Cliff, Debt and Defense Spending

Defense Bits

Just thought I’d note a few items from the last few issues of Defense News, which I subscribe to (at a hefty cost).

While the conflict between Hamas and Israel is over, no doubt Israel’s Iron Dome missile defense system performed superbly, taking out a reported 90% of the rockets it targeted, though many still got through.

“Israel’s Rafael initiated emergency, round-the-clock operations last week to meet intensifying demand for Iron Dome intercepting missiles and the accelerated deployment of a fifth battery to defend against Gaza-launched rockets and missiles.

“The state-owned company added a nighttime shift Nov. 14 as Israel’s four operational Iron Dome batteries scored more than 100 intercepts in battles against persistent barrage attacks….

“ ‘We’re working three shifts and weekends to respond to MoD’s request to speed additional capabilities into the battle,’ a company executive said.

“He credited a special U.S. appropriation of $205 million for enabling the accelerated push to deploy additional interceptors and the newest Block-2 version of the Iron Dome intercepting system.

“ ‘Without a doubt, if it wasn’t for the U.S. $205 million, we would be facing a serious operational deficiency in our inventories,’ he said.”

Ed: Israel will need a lot more coverage from Iron Dome when it next battles Hizbullah.

“Even if the U.S. Congress is able to hammer out a debt deal that avoids sequestration in January, the resulting agreement will likely result in billions of dollars in additional cuts to the Defense Department – perhaps as much as $25 billion – likely forcing the military to alter its roles and missions.

“Internally, some of the nation’s largest defense contractors are also planning for a possible $25 billion cut annually from current spending levels. That $25 billion is half of what DoD is expected to absorb annually under sequestration. This month, Boeing announced a major reduction among its executive ranks as it prepares for a decline in U.S. defense spending.

“ ‘If they come up with a deal to avert sequestration, I think the defense portion of that deal will be cuts [at] about half the level that sequestration would require,’ said Todd Harrison, an analyst with the Center for Strategic and Budgetary Assessments….

“Last week, the Stimson Center think tank in Washington released a report presenting a new military strategy for DoD that could be tailored to various levels of spending….

“The panel [of retired generals and admirals] examined a vast number of official studies and expert recommendations and concluded DoD could save about $1 trillion over the next decade if it instituted ‘better manpower utilization’ measures and compensation system and acquisition reforms.’”

“What would it mean to us if the debt continued to increase apace? In particular, what would a continued increase in our national debt mean to America’s ability to afford the defense it needs?

“To put the subject in context, as of this writing, the gross national debt is $16.3 trillion. The latest U.S. gross domestic product (GDP), the total value of all the goods and services as of the end of September of this year, was $15.8 trillion. Notice something? That’s right. Our debt is larger than our worth, just like some European countries that we’ve been reading about in the press….

“The net interest on national debt is a significant data point describing the financial condition of the country. For countries, how much interest they pay on debt is a big deal because of the large numbers involved: billions and trillions of dollars….

“Since 2009, there has been a steady increase in the cost of the net interest in the national debt. OMB estimates that the spending on national defense will decrease precipitously. Defense spending will be reduced by 18 percent, from a high of $716 billion in 2012 to a projected $589 billion in 2017, according to the OMB tables. Defense spending will be 2.9 percent of GDP.

“The net interest during this decline in defense spending will have increased from $225 billion to $566 billion; an increase of 2 ½ times. The net interest on the national debt, will be 96 percent of what the U.S. will be spending on national defense. In real terms, we’ll be paying as much interest on our debt as we will be paying for everything the Army, Navy, Air Force and Marine Corps have and do.

“Money spent on national defense provides tanks and planes and ships and military bases, and soldiers, sailors and airmen. Money spent on net interest provides the nation nothing, nada, nix, zero. Or does it? A willingness to borrow so much that we pay as much in interest on our national debt as we spend on national security provides a clear picture of fiscal irresponsibility.”

U.S. Army Chief of Staff Gen. Raymond Odierno…on what keeps him up at night (aside from sequestration).

“I continue to worry simply about the Middle East. You continually see these changing dynamics. The Egyptian-Israeli relationship is very different now than it was a year ago. What does that mean to stability? What does it mean with Iran’s influence and continued move to gain more influence? What does that mean with them and the Sunni-Arab world?”

*With my new “Nightly Review” video project… ‘Hot Spots’ will be posted infrequently.

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