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Home Publications Blogs Beat the Press Joint Chief of Staff Overestimates the Deficit

Joint Chief of Staff Overestimates the Deficit

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Tuesday, 06 July 2010 04:44

Morning Edition ran a piece (not on its website) today that presented the view of the Admiral Mike Mullen, the chairman of the Joint Chiefs of Staff, that the national debt is the greatest threat to the security of the United States. According to the piece, Mr. Mullen claimed that in a couple of years the United States would be spending $600 billion a year in interest, an amount that he claimed was larger than the defense budget.

According to the Congressional Budget Office, the government is projected to spend $298 billion in interest in 2012 (@ 2 percent of GDP), less than half of projected spending on defense.

 

Comments (10)Add Comment
...
written by izzatzo, July 06, 2010 7:33
In the cold war and Vietnam the greatest threat was the commies. Then it was weapons of mass destruction in Iraq after 9-11, which morphed into a series of ad hoc terrorist threat parables. Along the way, climate change entered the picture as the greatest threat to national security predicted by the Pentagon.

Now it's the national debt. Imagine that. The Pentagon actually missed health care as the greatest threat to national security and instead has identified itself as the greatest threat per increased debt spending. Finally, full circle closure has been attained on the greatest threat and we're all safe.

Like the rider on the horse in Mel Brook's "Blazing Saddles" who pointed the gun at his own head. Don't worry folks, we caught the criminal. Everything is under control.
What will interest payments be....
written by cas127, July 06, 2010 8:11
What would interest payments be if calculated at historical interest rates?

At rates when we're competing for capital with Chinese domestic projects?

At rates not subsidized by the printing of dollars by the Fed - an action that incrementally destroys the private savings of all Americans?

All compulsive Keynesians seem to be addicted to playing with matches/nuclear weapons.
interest rates fluctuate
written by David Cay Johnston, July 06, 2010 8:34
Currently the government's blended borrowing rate is 3.22%, as I pointed out in my June 7 Tax Notes column on UNDERtaxed Freedom Day, which this year occurred on June 12. That is the day when individual income tax receipts equal all federal interest, whether accrued or paid in cash.

If interest goes to 7.2 percent, at current income tax receipts, interest on the federal debt would equal all individual income tax receipts through Dec. 31. That squeezes out commonwealth investments needed for long-term economic growth.

NPR may have missed a nuance in the admiral's comments, but the current $418 billion interest cost would rise to $600 billion if rates go to 4.6 percent -- and that assumes no growth in debt levels.

We should not mindlessly fear debt, as much of America does egged on by fear mongering across the MSM from David Brooks to Fox News. Missing from the national debate is an understanding that deficit spending should be for short-term stimulus when demand collapses and not the chronic stimulus of 46 of the last 50 years and especially the GWBush years. So should the wise words of Keynes in 1932:

There is no possibility of balancing the budget except by
increasing the national income, which is the same thing as
increasing employment.




Does the General make any proposals?
written by Bill Turner, July 06, 2010 8:51
Considering that about half of all defense spending by all countries is spent by the US (and this excludes the cost of the wars), and that the US has bases in over 100 countries, is he suggesting a reduction in military spending that could potentially be targeted directly at the deficit? What would a 10% reduction in spending look like? Would such a reduction affect our security in any significant way? Why do we need to spend such amounts? It is often quoted that we need the military to defend American interests. What are these interests? Many would suggest it is protect the flow of oil. After all, we import about 50% or so, and consume approximately 25% of the total world output annually, so it isn't hard to believe that protecting the supply line is the main purpose. What would our defense spending needs look like if we were largely energy independent? What would it cost us to get there? A $60b annual investment may go a long way to getting us there.
did the general...
written by David Cay Johnston, July 06, 2010 9:02
Yes He said we are spending too much on the military.
Seriously.
That DoD recognizes it is spending too much and Congress doe snot goes to why it is too bad Ike edited the middle word out of his 1959 farewell speech on the Military-Congressional-Industrial complex.
Dean skipped the Social Security Trust Fund interest again.
written by AndrewDover, July 06, 2010 10:43
When Dean argues SS trust fund finances, he correctly includes interest due to the SS trust fund.

But now, somehow we are quoting "Net interest numbers" which exclude SS Trust fund interest which makes a $119 billion a year difference in 2012. Ref:
http://www.cbo.gov/budget/factsheets/2010b/OASDI-TrustFunds.pdf
An honest question
written by diesel, July 06, 2010 11:18
"There is no possibility of balancing the budget except by increasing national income, which is the same thing as increasing employment." DCJ quoted Keynes.

This doesn't seem to preclude a nation which has say, 15% unemployment, comprising an unemployed rabble of Douthat breeders and Reagan/Bush mass-naturalized illegal immigrants living in a wretched Malthusian squalor of utter economic helplessness, their survival depending on the whims of daily lotteries that determine who gets temporary employment--like longshoremen before the great west-coast labor strikes of the thirties.

That would be "increasing national income....increasing employment" in a style that would bring a smile to most Republicans business leaders, so in their own way, a lot of Republicans would agree with Keyne's statement.

Or does Keynes mean increasing employment as a percentage of people capable of working, and consequently, strong Labor and more equitably shared prosperity?
Our Oil Supply Lines
written by Ethan, July 06, 2010 12:20
Bill Turner @ 7:51 A.M.
What oil supply lines do we really need to protect?
Our largest source of imported crude is Canada.
Our second largest source is Mexico.
Our third largest source is Venezuela.
Only in fourth place do we get to Saudi Arabia.
Maybe we should cultivate better relations with our third largest supplier. Just sayin"
...
written by liberal, July 06, 2010 12:58
David Cay Johnson wrote, He said we are spending too much on the military. Seriously.


Yes and no. Typically Congress adds stuff the DOD doesn't want for jobs in their districts.

But in the sense of "we could cut military spending by 50% and not suffer in terms of the US's strategic interests"? Absolutely not.
Just a misunderstanding of "Within two years"
written by AndrewDover, July 06, 2010 5:31

"Admiral Mullen, in a recent Washington speech, highlighted one troubling number: Within two years, just the annual interest on the debt will be close to $600 billion.

Adm. MULLEN: And that's, notionally, about the size of the Defense Department budget. It's not sustainable."

http://www.npr.org/templates/transcript/transcript.php?storyId=128320487

So if "Within two years" means in the span of two years, then the sum of the interest, not counting the Social Security trust fund interest, within 2012-2013 is 298+365 = $653 billion.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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