Sen. Coburn Tackles Runaway Spending (entitlement spending slated to grow faster than economy)

Real Clear Markets ^ | 06/07/2010 | Josh Barro

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The largest driver of the long-term federal budget gap is entitlement spending that is slated to grow faster than the economy. But a second key driver -- growth in security spending -- often gets short shrift. That national security is important does not mean that the Pentagon should be exempt from fiscal oversight or off the table when we talk about balancing the federal budget. This is especially true because higher defense spending does not always make us safer.

From the end of the Vietnam War through the end of the Cold War, national defense spending typically ran between 5% and 6% of GDP. With the Soviet threat eliminated, the "Peace Dividend" allowed a reduction in defense spending as a share of the economy, bottoming out at 3% of GDP in 1999 and 2000. This restraint was one of the key drivers of the budget surpluses of the Clinton-Gingrich era.

But since the September 11 attacks, the trend has reversed. In 2010, defense spending will again reach 4.9% of GDP, the same level as in 1980. About half of this increase has been driven by specific costs of the wars in Iraq and Afghanistan, and the rest by growth in base military spending faster than economic growth. With deficits expected to run in the range of 4% of GDP over the next decade, a 2% of GDP rise in defense spending is a huge deal.

Senator Tom Coburn made these points last month in a letter to the chairmen of the president's deficit commission. Coburn, who sits on the commission, puts a spotlight on rapid, inflation-adjusted growth in military spending and the lack of oversight at the Pentagon as that money is spent.

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In his letter, Coburn notes that inflation-adjusted base Pentagon spending (that is, the figure excluding the additional costs for operations in Iraq and Afghanistan) rose from $407 billion in 2001 to $553 billion -- a 36% increase -- by 2011. "Supplemental" spending to cover the wars in Iraq and Afghanistan will add a further $159 billion in 2011.

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Read Tom Coburn's Memo here

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I’m certain you could find savings in a budget as huge as that of the Department of Defense, but entitlements are the real issue in the long term budget forecast. Even if Defense spending was reduced to zero there would still be budget deficits as SS, Medicare/Medicaid, and interest on the debt consume the entire federal budget.