Cut Social Security & Veterans' Benefits? Cut the Pentagon Instead

The boss organizes the workers, union organizers like to say.

Say what you want about President Obama's proposal to cut Social Security and veterans' benefits with the "chained CPI." He did accomplish one thing for liberals that they often have a hard time doing on their own.

He united them - in opposition to his proposal.

Since Friday, the following groups, among others, have contacted me expressing outrage about and pledging to vigorously oppose the President's proposal: the AFL-CIO, MoveOn, Progressive Campaign Change Committee, CREDO Action, Americans for Democratic Action, Democracy for America. Some of these groups are explicitly threatening primary challenges to any Congressional Democrat who supports the President's proposal.

But that's not all we have to celebrate. If, like most Americans, you prefer to cut what Secretary of Defense Chuck Hagel has called the "bloated" Pentagon budget instead of cutting Social Security and veterans' benefits, you have even more reason to rejoice.

Because at this political juncture, everyone in America who says "no cuts to Social Security or veterans' benefits" is effectively saying "cut the bloated Pentagon budget," whether they do so explicitly or not. If the "grand bargain" is killed and Social Security and veterans' benefits are spared - apparently these are all the same political event - then the Pentagon budget will be cut instead.

And that means that at long last, we're effectively having the "guns vs. butter" debate in the United States that we have been so long denied.

And that's not all. We have a new way to talk about the Pentagon budget, that every American can easily grasp. We can talk about the Pentagon budget by using the President's proposed cuts to Social Security and veterans' benefits as the unit of measurement.

Economists talk about a "numeraire good." The idea is that you can measure economic value with any good that has economic value as the unit of measurement. It's convenient to use dollars - that's a key function of money, it's a "unit of account" - but you could just as well use bananas, or shoes, or bottles of wine. Or the President's proposed cuts to Social Security and veterans' benefits.

According to the Congressional Budget Office, the President's proposal to use the "chained CPI" to calculate cost of living increases would save the government $127 billion over ten years by cutting Social Security and $36 billion over ten years by cutting "programs affecting veterans and the poorest elderly and disabled." That's a grand total of $163 billion over ten years from hitting seniors, veterans, and the disabled.

So, now we have a new unit of measurement for talking about the Pentagon budget. Anything in the Pentagon budget that costs $163 billion over ten years costs as much as President Obama proposes to save by hitting seniors, veterans, and the disabled.

Let us consider just three examples.

Consider the war in Afghanistan, and ignore all costs except the current appropriations cost of keeping tens of thousands of U.S. troops in Afghanistan. Using the rough figure of a billion dollars for every thousand troops deployed per year, suppose we withdrew all U.S. troops from Afghanistan in 2013, so that the cost were zero for the next ten years. And compare that to a scenario in which we keep an average of 25,000 troops there for the next ten years. Then ending the war would save $250 billion, roughly twice what President Obama proposes to save by whacking seniors, veterans, and the disabled.

Consider the F-35 Joint Strike Fighter. Last year, Winslow Wheeler reported that the acquisition cost for the F-35 had risen to $379.4 billion for 2,457 aircraft. That's just the cost to buy the planes, not to fly and maintain them:

The current appraisal for operations and support is $1.1 trillion -- making for a grand total of $1.5 trillion, or more than the annual GDP of Spain.

Assuming that everything is proportional (and that these costs don't further escalate, which Wheeler assures us they will), if the F-35 costs $1.5 trillion for 2,457 planes, that's $610 million per plane. How many F-35s would we have to not buy in order to spare seniors, veterans, and the disabled from getting whacked? We would only have to not buy $163 billion worth, or 267 planes. That would still leave 2,190 planes. We could reduce the number of F-35s we purchase by just over 10% - cut one single weapons system by 10% - and save as much money as President Obama proposes to save by whacking seniors, veterans, and the disabled.

Lastly, consider Pentagon contracting: the Project On Government Oversight notes that "every year for the last five years the Pentagon has spent more than $360 billion purchasing goods and services from contractors" and that "service contractors can cost, on average, 2.94 times more than an average Pentagon civilian employee performing the same job. "

Suppose it were true that it costs 2.9 times as much to do things through contractors as it does to use Pentagon employees. That's a different statistic - I'm substituting an apple for an orange. We don't actually have the numbers that we need to do the right calculation, because as POGO notes, the public doesn't have access to contractor workforce size and cost data. But what we're after here is just a rough sense of what Pentagon spending choices and cuts to Social Security and veterans' benefits look like when you put them on the same scale. The actual policy choice we need to make to protect Social Security and veterans' benefits and cut the Pentagon budget is merely to kill the grand bargain and let the sequester-level budget caps on discretionary spending stand.

Suppose that it were possible to in-source everything that contractors are now doing. If it costs 2.9 times as much to do it through contractors, then it should cost $124.14 billion to do the same things in house. Call it $125 billion to use round numbers.

Thus, if it were possible to in-source everything that contractors are doing, one would save $235 billion a year - $360 billion minus $125 billion, a cost reduction of 65%. Note that these savings would come not from ceasing to do anything that the Pentagon is now doing, only by doing the existing things more cheaply by eliminating contractors and doing the work in-house.

Now, even ignoring political constraints, it seems quite reasonable to suppose that one could not plausibly in-source everything. Some things are harder to in-source than others. Conversely, some things are easier to in-source than others. In addition, 2.9 is an average. Some things are relatively more expensive to contract, some things are relatively less expensive to contract.

By how much would one have to cut Pentagon contracting to avoid cutting Social Security and veterans' benefits? We'd need to come up with $16.3 billion a year.

Suppose we cut Pentagon contracting by 7%, bringing the work in-house.That should save about $16.5 billion a year.

So, in this calculation - which is surely not right, but is simply intended to be illustrative - we could save as much money by bringing 7% of contracted Pentagon work in-house as the President proposes to save by hitting seniors, veterans, and the disabled.

The key takeaway from all these numbers is that compared to the bloated Pentagon budget, the proposed savings from whacking seniors, veterans, and the disabled are chump change, not worth bothering with. The crucial thing to remember in all this is that none of us needs to come up with a specific plan to replace cuts to Social Security and veterans benefits with Pentagon cuts. Cutting the Pentagon budget instead - the sequester - is the default option, the status quo. All we have to do if we prefer Pentagon cuts to cuts in Social Security and veterans benefits is to kill the grand bargain. The Pentagon can then propose what mix of ending the war in Afghanistan, buying fewer or cheaper fighter planes, cutting contracting, closing foreign military bases, and retiring expensive generals it prefers to stay within its new budget. And then we can decide if we're ok with that, or prefer something else.

Robert Naiman is Policy Director at Just Foreign Policy. Naiman has worked as a policy analyst and researcher at the Center for Economic and Policy Research and Public Citizen's Global Trade Watch. He has masters degrees in economics and mathematics from the University of Illinois and has studied and worked in the Middle East. You can contact him here.