The GOP Tax Plan Is a Threat to National Security

As our federal debt spirals up and up, military readiness will inevitably suffer.

U.S. Senate Majority Leader Sen. Mitch McConnell (R-KY) (right) talks with Sen. Orrin Hatch (R-UT) as they attend a press event on tax reform on Sept. 27, at the Capitol in Washington, D.C. (Alex Wong/Getty Images) 

BY KORI SCHAKE-NOVEMBER 2, 2017, 2:50 PM

Republicans control both houses of Congress and the presidency, which conservatives of yore would anticipate would result in a sustained assault on the most important national security challenge facing the United States. That yawning vulnerability in our defenses is the national debt. But the tax plan released Thursday by the congressional leadership would have Dwight D. Eisenhower weeping. Not only will it increase the debt, but it also has no reasonable prospect of providing the money the administration argues the defense enterprise requires.

The U.S. government now owes roughly $20.5 trillion, more than double what our debt was 10 years ago. President Donald Trump and the Republican-led Congress have introduced a tax reform bill that would decrease federal revenue by a projected $5.5 trillion. Meanwhile, Republicans in Congress are congratulating themselves on committing to increase the debt by only $1.5 trillion over 10 years and are currently wrangling over possibilities — capping 401(k) deductions, taxing college endowments — to close the gap. Even if they succeed in finding a formula that can attract sufficient votes to pass into law, the tax reform is likely to worsen rather than improve on our security.

The debt is important in three ways. First, in relation to GDP, it is an important indicator of the country’s risk of stagnation that prevents growing the economy — even middle school students know that increasing the denominator makes the numerator relatively less important. Second, it exposes us to risk in credit markets: Should holders of U.S. debt become skeptical of our creditworthiness, interest rates will increase, making our debt costlier and putting further pressure on the government’s ability to provide services, including defense. Third, debt service is impinging on the funds available for discretionary spending, including defense spending, and that is likely to get much worse if either interest rates rise or the economy sputters.

The United States has been extraordinarily lucky that we have accrued such staggering debt in a time of historically low interest rates

. We have also been lucky that other prospective holding currencies have not become genuinely substitutable: The euro has its troubles with shaky eurozone finances, the renminbi its opaque stewardship, and cryptocurrencies their cybervulnerabilities. But none of these conditions is likely to remain fixed over time, especially if the political dysfunctionality of spending by the U.S. government continues.

Republicans assert that widening the tax base and freeing up the economy will provide new revenue. That would be a reasonable prospect if the administration had a theory of victory for passing a budget aligned to its spending priorities. It does not. The budget submitted by the Trump administration is, to quote a leading Republican committee chair, “dead on arrival.” The Budget Control Act will remain the law of the fiscal land, the Damoclean sword of sequestration hanging over the Defense Department’s head.

ABOUT THE AUTHOR

Kori Schake is a fellow at the Hoover Institution.

A decade ago, Congress reached a bipartisan agreement that cuts to federal spending would be applied with 50 percent to domestic priorities and 50 percent to defense. It has become the closest thing to an immutable law of federal spending. Secretary of Defense James Mattis has argued that the Pentagon deserves a disproportionate amount of federal spending. But his appeals have not changed a single vote.

Defense Department spending has been declining for more than a decade, due first to President Barack Obama’s policy choices and then the mandatory cuts required when the Budget Control Act spending ceilings were breached — which they have been for the past nine years. Congress could not reach agreement on prioritized reductions and so agreed to limit federal spending by cutting everything proportional to existing budgets. Which is, needless to say, terrible management.
In 2010, Mike Mullen, then-chairman of the Joint Chiefs of Staff, identified the debt as “the most significant threat to our national security.”

 In 2012, a subsequent chairman assessed that the defense strategy could not be carried out if “even $1” were cut from the Pentagon budget. And yet $50 million was cut from that budget, even before the Budget Control Act kicked in. In the six years since the act became law, the military chiefs and their civilian superiors have uniformly and repeatedly argued that resources are inadequate to their assigned missions and that Congress tying their hands against sensible management of their budget compounds the problem.

The Office of Management and Budget must privately believe that it is giving fiscal conservatives in Congress political cover to vote for deficit spending. That is, in order to get needed defense spending, Republicans will vote for domestic spending and increasing the debt. Republican leaders must be banking on tax reform spurring economic growth sufficient to dull the edge of fiscal husbandry and making painful trade-offs unnecessary.

This is wildly unlikely unless Republican leaders — in the White House and in Congress — do the hard work of persuading their colleagues on both sides of the aisle to adopt a set of national priorities. Nothing in the behavior of President Trump, his budget team, or Republican leaders in Congress indicates that will be the case. And if it is not, the Republican tax reform proposal, even if it passes, will leave our greatest national security vulnerability exposed and continue the emaciation of our defense program.