Monthly Archives: April 2012

Illegal Immigration

Illegal immigration is one of the most complex problems facing Americans.  Since the onset of the current “Great Recession,” the financial impact of the issue on federal, state and local budgets, and the implications for the job market, have made the topic more crucial than ever.  

The Supreme Court
    As this report goes to press, The United States Supreme Court is preparing to hear the intense conflict between the Obama Administration and the State of Arizona over that state’s 2010 law intended to combat illegal immigration.  Governor Brewer has stated she will be in attendance at the proceeding.
    The statute in question requires police to check the immigration status of individuals stopped for other reasons.  It also makes it illegal for immigrants lacking a work permit to seek employment. Supporters of the legislation point to the tidal wave of unauthorized immigrants, the failure of the federal government to provide adequate oversight of the border, and the costs of providing services to illegal immigrants.  Opponents claim only the federal government has authority in this area, and that the measure may lead to profiling of Hispanics.
    A variety of states have enacted their own measures, mostly acting out of frustration with the federal government’s failure to adequately address the issue, as well as concerns over the cost of educating and providing medical care to illegals.  According to the National Conference of State Legislatures, thirty states have considered 53 omnibus bills.
   The Mexican government has filed an amicus brief, contending that the state measure constituted “an imminent threat to Mexico-U.S. bilateral relations.”  (In May of 2010, the Obama Administration and the Mexican government issued a joint declaration “Concerning 21st Century Border Management.”  The document, which is not legally binding, established a bilateral executive steering committee to further lawful trade, and curb the illegal flow of people and goods.)
    The Supreme Court’s ruling will probably be issued in June. Continuing its ongoing dispute with the Supreme Court, the Democrat Party is planning to contest the Court’s decision through new legislation if it rules against the White House position, according to the Washington Post. While the move is geared to shoring up support among some Latino voters, the move may backfire in the upcoming general election.  Rasmussen reports that 59% of the public supports automatic immigration checks during routine traffic stops, a type of enforcement that cannot be performed by federal authorities.
 Interestingly enough, the Obama administration hasn’t launched attacks on “sanctuary” jurisdictions that defy federal law by not reporting illegals that come to the attention of local officials.
  The federal Office of Immigration Statistics reports that the number of illegal immigrants has grown by 27.5% since the year 2000, jumping from 8,460,000 to 11,200,000. The number is even more significant when compared to the mere 3.5 million present in 1990.   However, since 2005, the number of apprehensions by Department of Homeland Security’s Border Patrol has declined from 1,189,000 to only 340,000 in 2011.
    In fact, border apprehensions in 2011 were at their lowest level since 1972. 86% of those caught last year were male, up from 82% in 2005.   Despite the challenge represented by these statistics, the Obama administration has requested a decrease of 4% in the budget for Immigration and Customs Enforcement (ICE).   The White House has also requested a reduction of $17 million in the Section 187(g) program, which allows Washington to authorize state and local law enforcement agencies to carry out immigration enforcement duties, as noted in testimony before Congress by ICE Director John Morton on March 8.
  According to the Federation for American Immigration Reform, “Illegal immigration costs U.S. taxpayers about $113 billion a year…At the federal level, about one third of outlays are matched by tax collections from illegal aliens.  At the state and local level, an average of less than 5% of the public costs associated with illegal immigration is recouped through taxes collected from illegal aliens.”
 The ongoing Great Recession has caused what will probably be a temporary suspension in the growth of the number of illegal aliens present in the U.S., as many frustrated over the lack of work opportunities have voluntarily left.
Crime and National Security Issues
 The Violent Crimes Institute calculates that 240,000 illegal immigrants are sex offenders.  Rep. Peter King (R-NY) has produced a study noting that twelve Americans are murdered each day by illegal aliens.  It has been contended that even those not personally inclined towards lawlessness are vulnerable to being forced into crime by criminals preying on their vulnerability.  Concern has been expressed that terrorists mingling in with illegals crossing the border for jobs present a significant national security threat.
  A Heritage Foundation study concluded that “The real problem with undocumented workers is that flouting the law has become the norm, which makes the job of terrorists and drug traffickers infinitely easier.”
Health Care
   The impact on health care is a crucial part of the illegal immigration debate.  In June of 2007, a number of Congressional Representatives, including several who are also physicians, wrote to the Department of Homeland Security and the Centers for Disease Control and Prevention to express their concern over the communicable diseases illegals may carry.  Unlike legal immigrants, illegals are not subject to a health examination as part of the process for obtaining a green card.
   “It is not a surprise,” the Representatives wrote, “that the rate of TB infections is highest in the states that attract the most illegal immigrants…In addition to TB, we should be concerned about the many other diseases thought to be nearly eradicated in the United States that could be brought back through unchecked immigrants, including hepatitis B, polio, and avian flu, just to name a few…illegal immigration is a serious health threat to American citizens.”
   In 2008, an analysis by the Republican Study Committee calculated that one sixth of the total number of those without medical insurance were illegal immigrants.
The Workforce
   Approximately 8 million illegals are in the nation’s workforce.  Philip Valentine cites a Maricopa County study performed by economist George Borjas that indicates wages for entry level workers are approximately 4.7% less due to the impact of those illegals.  Mark Kirkorian, writing in National Review, argues that there has been no proof that illegal immigrant labor has produced any net economic benefit to the nation.  He maintains that self-serving employers seeking access to labor at costs below what Americans would accept is the motive for many who continue to “turn a blind eye” to this issue.
   Others, however, believe that illegal immigrants produce unacknowledged benefits to the nation.  Former Federal Reserve Chair Alan Greenspan’s 2009 testimony to the U.S. Senate Subcommittee on Immigration, published on the Pro/Con site, outlines this perspective:
  “There is little doubt that unauthorized, that is, illegal, immigration has made a significant contribution to the growth of our economy.  Between 2000 and 2007, for example, it accounted for more than a sixth of the increase in our total civilian labor force…unauthorized immigrants serve as a flexible component of our workforce, often a safety valve when demand is pressing and among the first to be discharged when the economy falters.  Some evidence suggests that unskilled illegal immigrants (almost all from Latin America) marginally suppress wage levels of native-born Americans without a high school diploma, and impose significant costs on some state and local governments.  However, the estimated wage suppression and fiscal costs are relatively small, and economists generally view the overall economic benefits of this workforce as significantly outweighing the costs.”
  The Cato Institute also disputes concerns about the economic impact of illegal immigrants.  They argue that most jobs taken by illegals are unskilled, appealing only to the 7% of native-born Americans who lack a high school diploma. The organization has urged the federal government to refocus its border control efforts towards criminals and terrorists.
  Democrats seek to leave the enforcement task to the federal government, to the relative exclusion of the states. They emphasize tougher restrictions on employers who hire illegals, and are more inclined to consider amnesty for illegals who have been in the nation for a prolonged period of time.
  Republicans advocate far tighter border controls, and oppose amnesty. Rep. Lamar Smith (R-Texas) has objected to the Obama Administration’s “backdoor amnesty” actions.
 Both sides have forwarded positions (for example, the various versions of the DREAM act) that attempt to address the needs of those who entered with their parents at an early age and have not known life in any nation but the USA.
   It is evident that the high rate of unemployment, budget deficits at the federal, state and local levels, and the threat of terrorism will continue to place America’s porous borders and the presence of a large illegal population at the forefront of public debate.

America’s Crisis at Sea

The Obama Administration responded to critics of its downsized military budget (see NY Analysis, 2/23/12) with statements that it was maintaining resources on the most likely threats, especially in the Pacific region.  It pledged to provide adequate funding both to protect U.S. interests and reassure America’s allies.  To accomplish this, the White House emphasized that the Navy would be given preferential treatment.
Concerns for maintaining the size of the fleet include not only the traditional challenges faced by America’s seagoing defense, but the highly worrisome naval power China has developed over the past decade.
Details indicate that the Navy was not spared, after all.  President Obama is calling for a 1.7% reduction from the Navy’s 2012 baseline appropriation, according to The Navy Times.  Starting with force numbers that are drastically reduced (down from 600 ships in the 1990’s to just 284 currently) the Navy will likely see further cuts in projected replacement and modernization programs. Additionally, accounting gimmicks are used that will provide “long term delays” rather than cancellation of new construction. This allows the Administration to respond to critics who say that the force has become too small by saying that replacement programs remain alive, even though they are extensively delayed. Despite assurances, the fleet size, under the current budget, could actually shrink to about 280 by 2017.
Despite widespread agreement that a 313 ship force is the bare minimum necessary for the Navy to protect the U.S., the current budget pegs the maritime force at only 280–285 vessels through the next five years.  Even that figure can’t be guaranteed, since age, accident, or hostile action could produce losses. 16 planned ships will be cut from the five year budget plan. According to a Navy League Report, a 20% cut in the number of warships scheduled to be built is planned. Further, according to the Department of Defense, procurement of the F-35 Fighter aircraft will be reduced by “nearly 50%,” in addition to the elimination of six Marine TACair squardrons. The need to replace the Navy’s aging fighter aircraft was recently emphasized by the crash of an F-18 F/A in Virginia, a disaster that early reports indicate may be due to the advances age of the aircraft.
To soften the public relations impact of cuts to a force that even the President emphasized needed to be protected from the budget crisis, each reduction is rationalized with accounting techniques that term the changes mere delays.  Examples from the Department of Defenses’ related budget proposal statement include:
           The ordering date of the planned aircraft carrier (CVN 79) hasn’t changed, but “The construction schedule will be moved back two years.”
·       Landing Craft Assault class vessels will (eventually) remain the same in number, but “procurement will be slowed.”
·       Amphibious Assault Ship (LHA) construction will be moved from FY 2016 to 2017.
·       The guided missile cruiser force won’t be cut—but nine ships will be “retired early.”
·       The development program for OHIO class subs will continue, “but at reduced levels.”
An objective analysis of the threat level justifies a fully funded Navy.  The Congressional Research Services’(CRS) recent report, China Naval Modernization: Implications for U.S. Navy Capabilities, stresses that Beijing’s maritime modernization effort “has emerged as a key issue in U.S. defense planning.  The question is of particular importance to the U.S. Navy, because many U.S. military programs for countering improved Chinese military forces would fall within the Navy’s budget.”
China’s submarine force is nearly double that of America’s. By 2015, its total fleet will be larger than that of the U.S. Navy.  Chinese naval units have already harassed US Navy vessels.  While Washington discusses how deep to cut the defense budget, China continues its pattern of increasing spending by an average of 16.2% annually, according to the Asian Defence publication. That figure may only be the tip of the iceberg. The Pentagon has charged Beijing with hiding its real military spending. The CRS noted that even “in the absence of …conflict, the U.S.-Chinese military balance in the Pacific could nevertheless influence day-to-day choices made by other Pacific countries, including on whether to align their policies more closely with China or the United States.”
China began its ambitious naval modernization in the 1990s.  Sinodefence reports that the 225,000 man “People’s Liberation Army Navy” is organized into three fleets: North Sea, East Sea, and South Sea.  Each consists of surface and submarine forces, naval aviation, and coastal defense forces.
Beijing’s effort has been successful in every way.  Powerful and effective anti-ship ballistic missiles (ASBMs), submarines, and surface ships have been developed, along with well trained, highly professional and capable crews.
The high caliber and impressive size of Beijing’s naval force clearly indicates that its goals extend beyond mere self defense and the imposition of its claims against Taiwan.  They include  China’s expansive and controversial claims far beyond its legitimate borders, the expansion of its international influence, and the solidifying of its role as a global superpower, particularly in the Pacific, where, according to CRS, it seeks to displace U.S. influence.  The Department of Defense notes that “China’s rise as a major international actor is likely to stand out as the defining feature of the strategic landscape of the 21st Century.”  While serving as Chairman of the Joint Chiefs of Staff, Admiral Michael Mullen  noted in June of 2010 that he was “genuinely concerned” about Beijing’s military might.
China’s technologically advanced naval weaponry combined with its aggressive posture render  it a greater threat to the U.S. than that of the former Soviet navy.  Devices than can disable seaborne electronics from a significant distance, as well as its development of revolutionary “anti ship ballistic missiles,” combined with satellites that provide excellent targeting data, give Beijing the tools to win conflicts at sea, when combined with China’s growing conventional navy.
China has developed its naval power to achieve a number of goals.  In addition to supplanting U.S. influence at sea and intimidating Taiwan, it has committed incursions into Japanese waters, and laid claim to oceanic resources of several other nations such as Vietnam, the Philippines, South Korea and India.  Recently, a worried South Korean military official was quoted in The Chosun Iibo, noting: “We need to establish a new security strategy by looking into a wide range of military partnerships with China as well as strengthening our alliance with the U.S.”  (The China Reform Monitor  reports that China will include Leo Island, controlled by South Korea, in its regular maritime patrols, and would deploy its first aircraft carrier there in August.)

Undisputedly, America’s maritime interests and those of its allies are clearly endangered by China’s dynamic new naval might.  The White House publicly recognizes the threat, but has failed to fulfill its commitment to counter it with adequate resources.

State Budget Crisis

Much attention has recently been paid to the out-of-control federal deficit.  But there has been a relative lack of focus on the crisis facing individual states, whose current enacted budgets account for almost $667 billion in general fund expenditures, with a collective $95 billion shortfall in 2013, as reported by the National Governors Association.
   In 2012, According to the Center for Fiscal Accountability:

   “As of March 2011, state and local government had an outstanding debt of $2.447 trillion.  Furthermore, state and local governments are facing a $3.1 trillion shortfall in projected pension spending-a shortfall of $21,500 for every U.S. household.  These liabilities are government worker pension promises that outpace the size of financial assets held by state and local governments.  State and local governments’ unfunded liabilities comprise a massive 22 percent of GDP. However, the true $3.1 trillion cost of state and local government promises continues to be masked with accounting gimmicks.”
   The American Legislative Exchange Council reaches a similar conclusion, stating that “Bloated state spending levels and trillions of dollars in unfunded government employee pension liabilities pose huge financial obstacles to economic recovery in the 50 states today…a vast majority of states have set themselves up to fail by spending beyond their means…Rapid growth in per capita spending, a lack of economic freedom, and weak balanced budget rules caused the budget gaps.  The recession just exposed these underlying problems…from 1985 to 2005, most state budgets doubled, and some tripled, in size. In the past decade alone, state and local budgets grew 90 percent faster than the private sector’s Gross Domestic Product.”
   The future for state budgets appears to be challenging. According to theStatelines report, “State of the States 2012,” “As a result of last summer’s deal to raise the federal debt ceiling, and the consequent failure of the Congressional ‘super committee’ to decide on budget cuts, states are bracing for automatic across-the-board cuts in education, social welfare and other programs for the upcoming 2013 fiscal year…More than 150 grant programs that send money to states could get cut…if…’sequestration’ occurs…federal aid to states could drop by nearly $9 billion in fiscal 2013.’ The Center on Budget and Policy Priorities is concerned that the conclusion of the federal stimulus program will place a heavy burden on state budgets.  A 2011 study entitled “Rich States, Poor States” stresses that “states that took federal stimulus money also agreed to ‘maintenance of effort’ provisions, which prohibit them from downsizing many programs going forward, compounding the problem.”
   Hovering all of the prospects for the future of state budgets is the specter of Obamacare.  The National Governor’s Association believes that related unfunded mandates will impose new costs of $118 billion through the next decade.
   There are some bright spots. The National Conference of State legislaturesreports that fiscal conditions are improving at a slow pace, although tax collections remain well behind pre-recession levels. Four states, California, Missouri, New York and Washington, have reported budget gaps since the start of the prior fiscal year, an improvement over the 15 states with a similar issue the previous period.  The Rockefeller Institute reports that 45 states saw their revenues increase over the prior year.
Case Study:  New York State’s 2012-2013 Budget
   In 2011, New York had the third highest cost of government per day in the nation, according to the Americans for Tax Reform Foundation.
   New York State’s 2012-2013 $132.6 billion state budget, at first glance, appears to be a more rational approach to the “Empire State’s” fiscal challenges than its predecessors.  It is, in fact, somewhat of an improvement, with a $135 million reduction from its immediate predecessor. A substantial part of that improvement results from the Governor’s signature accomplishment, the elimination of automatic spending hikes.  And, for the second time in a row, it was completed in time, after years of embarrassment in which legislators in Albany (the state capital) couldn’t come to terms until months after the legal deadline.
   But a closer examination reveals that although some progress was made, the basic problems remain unaddressed.
   On the surface, (and widely reported in the media) the budget cuts spending.  In reality, however, the portion of spending paid for totally from instate revenue (that’s state revenue minus federal aid) actually increased by 2%.
   All parties to the agreement (and again, widely reported in the media) proudly proclaim that no new taxes are in the budget.  Unfortunately, that’s inaccurate.
   Last December, taxes on upper income earners were increased by a whopping $1.5 billion.  Even before that, New York was the worst state in the whole nation in terms of individual tax rates, and was also one of the five worst states for tax increases in the 2003-2010 period.   (New York already had the highest top marginal personal income tax rate in the nation, at 12.62%, and the worst economic outlook in the nation, as reported by the American Legislative Exchange Council) Its’ major urban center, NYC, even has its own local personal income tax in addition to that imposed by the state.  There is, of course, a tendency to say that wealthier individuals can afford to pay the extra charge.  The problem is, they don’t have to.  Many will “vote with their feet” and simply move to a lower tax state. From 2000-2009, it was the biggest loser in migration of all 50 states. As a result, New York has been losing Congressional representation.
  The state’s onerous individual taxes are matched by the highest-in-the nation corporate tax rate of 15.95%, reports A.L.E.C.
  Political pandering is present in the budget.  One unacceptable gimmick relied on is the deferring of pension costs, in the indigestible amount of over $780 billion, for a decade.  This is an example of some Albany’s most irresponsible practices.  It does, however, allow legislators to keep public service employee unions at bay-and not coincidentally, prevents those unions from attacking incumbent legislators.
   To gain the support of New York City’s Mayor Michael Bloomberg, who has been generous with contributions to both Democrats and Republicans, funds are dedicated to a so-called “Close to home” initiative that allows NYC to take control of at-risk youth; currently, these young people are housed at less expensive upstate sites.  There is no convincing explanation of what benefits this provides, other than appeasing the mayor and other local NYC politicians.
  Education spending is increased, despite the fact that New York already spends far more per-pupil than any other American state.  According to the latest available statistics, Albany and local budgets provide $18,126 per student, dwarfing the national average of $10,499. Unfortunately, for all that extra funding (even accounting for the state’s higher cost of living) there is no indication that New York students’ dismal performance has benefited. One unacceptable gimmick the budget relies on is the deferring of pension costs, in the indigestible amount of over $780 billion, for a decade.  This is a throwback to the some of the worst practices Albany has used.
   Despite New York’s precarious economic condition, Albany continues to use taxpayer dollars to fund “pork barrel” projects (as reported in The Wall street Journal) and legislators continue to use taxpayer dollars in “official” newsletters that amount to little more than thinly veiled campaign literature.
   It is manifestly evident that states cannot continue on the path that led to their current precarious position.  The American Legislative Exchange Council notes that a number of states have “reset” their budgets to 2007 or 2008 levels to accommodate the new financial reality.  Both liberal and conservative legislators acknowledge that fiscal solvency cannot be achieved with business as usual spending, particularly in the area of state employee costs.
   The Heartland Institute is advocating a 10 point program to address fiscal problems in the states:
  1. 1.     Keep taxes low.  The evidence is clear and has been for many years: High taxes hinder economic growth and prosperity.
  2. 2.     Don’t penalize earnings and investment.  Taxes on earnings and investment income are particularly harmful to economic growth.
  3. 3.     Avoid ‘sin’ taxes.  Taxes on specific goods and services are often unfair, unreliable and regressive.
  4. 4.     Create a transparent and accountable budget.  Focus attention and resources on providing those services that are the core function of state government.
  5. 5.     Privatize public services.  Privatization is a proven way to reduce government spending while preserving or improving the quality of core public services.
  6. 6.     Avoid corporate subsidies.  Subsidies to corporations and selective tax abatement are questionable politics and bad economics.
  7. 7.     Cap taxes and expenditures.  A tax and expenditure limitation protects elected officials from public pressure to spend surplus tax revenues during good economic times.
  8. 8.     Fund students, not schools.  States and cities that have experimented with school choice have seen gains in academic achievement.
  9. 9.     Reform Medicaid programs.  Spending on Medicaid can be brought under control without lowering the quality of care received by Medicaid patients.
  10. 10.  Protect state employees from politics.  State and local government employees should be prohibited from deducting funds used for political purposes from the paychecks of public workers.
   For far too long, state governments have employed every accounting device to provide popular but unaffordable benefits and services.  Governors and legislators have placed their own careers over the fiscal health of their jurisdictions. Their ability to do so any longer has come to an end, and painful but practical steps must be taken.

Budget Battle

The dueling budgets presented by President Obama and Rep. Paul Ryan, (R-WI) neither of which is likely to become law, reflect an almost unprecedented divergence of views on the role of government, and the priorities of the American people.  The partisan tone was even contained in the official Budget Message of the President, which specifically criticized Republicans for not agreeing with the President’s proposals. The battle lines have become so stratified that the United States Senate hasn’t passed a budget in over a thousand days.

   There is one figure that can’t be denied by either side:  America is in a deep fiscal crisis. Overspending has produced an almost unimaginable $15.566 trillion dollar deficit that continues to grow by leaps and bounds.  As noted in the Heritage Foundation Report, Saving The American Dream, “We have come to a time of decision…Our nation is going broke, and we are passing the costs of these misguided policies to our children and their children.”

   Over the first three years of the Obama administration, the deficit grew more than it did during the entire eight years when Bush occupied the White House. As noted by the Center for Fiscal Accountability, “Almost immediately upon his inauguration, President Obama signed into law the $787 billion American Recovery and reinvestment Act that-along with TARP-totals nearly $1.5 trillion in government growth for taxpayers…in 2009, the [federal] government spent $3.9 trillion dollars, and took in $2.1 trillion dollars in taxes.  That is, the government spent beyond its means by $1.8 trillion-almost as much as it takes in on a yearly basis.”  Further White House proposals continued the trend, which will double the size of the already deficit-laden federal budget within ten years.

   The nation now faces a perilous reality in which the debt is greater than the Gross Domestic Product.  That’s a classic definition of bankruptcy.

   There is almost nothing to show for the great national spending spree over the past three years.  Unemployment and underemployment remain at crisis levels. The economy is barely progressing. Inflation has become a significant problem. Infrastructure needs remain largely unaddressed (unlike the Great Depression, when programs such as the WPA and the CCC’s engaged in massive public works.) Our armed forces haven’t received badly needed equipment. Even the vaunted American Space Program has been mothballed.

   American families have suffered. Homes have lost unprecedented amounts of value. According to an ABC News report, “The S&P/Case-Shiller 20-city index through November showed home values fell 3.7 percent from the previous year. The 20-city home price index dropped slightly more than the 3.3 percent economists surveyed by Bloomberg had expected, weighed down by foreclosed properties.”  Here too, the President and Congress diverge sharply on the reasons.  The White House concentrates on the mortgage crash; the Republicans emphasize the depressed economy.

   President Obama’s proposed 2013 budget includes tax hikes that range from $1.5 trillion to $1.9 trillion (depending on whose estimates you use) over the next decade.  (This would produce tax revenues above the historical average of 18.3% of GDP, according to Heritage.) The Bush tax cuts would expire for upper income earners, and the US corporate tax rate would remain as the highest in the world,  although the White House has said it may introduce a measure to lower the rate  (to a figure”in the high 20s,” according to a Reuters report) at a future date.  The additional revenue would provide a 17.5% increase in revenue during the coming year. The additional funds would not be mainly devoted to reducing the deficit. They would be used for $2.7 trillion in increased spending, but at least one key area, defense, would still endure budget cuts. Under the President’s plan, the annual deficit would be about $900 billion.

Rep. Paul Ryan (R-WI) has introduced a radically different budget, which he calls a “Path to Prosperity.”  The core of his proposal is a return to 2008 levels of non-security discretionary spending, producing a “primary balance” (spending-interest payments=revenue) by 2015. The savings are achieved by repealing “Obamacare,” and ending what it identifies as duplicative or useless government programs, and stoping “corporate welfare” to politically-connected private companies.  The proposal locks in spending caps and budget process reforms, and converts Medicaid spending into a block grant to the states.

   Rather than administer drastic cuts to national security funding as is currently planned, Ryan would slightly increase spending on military needs. (Defense spending as a percentage of the budget has dropped from 25% thirty years ago to 20% currently.) In contrast, the President’s budget would get rid of what he describes as “outdated Cold War era systems.” This is largely a code phrase for furthering the White House push to unilaterally slash America’s nuclear deterrent, end the capability to fight on two fronts, and sharply reduce acquisition of replacements for worn out and outdated equipment, as well as reducing health benefits for active duty servicemembers.

   According to Ryan, the individual tax code would be simplified by attacking loopholes, lowering rates, and broadening the base of those who pay. The alternative minimum tax, originally designed for wealthy taxpayers but now a major problem for many middle class taxpayers, would be eliminated. America’s highest-in-the world 35% corporate tax rate would be reduced to 25%. Investment in our military would not be slashed, as is currently planned.

   Republicans emphasize that Ryan’s plan would reduce the 2013 deficit by $20 billion, and save up to $3.3 trillion over the next decade. They estimate that federal spending would be reduced from 23% of the economy down to 20%. They note that the White House’s “stimulus” spending did little more than reward politically-connected corporations.

   The dueling budget proposals reflect diametrically opposed political beliefs. The President continues to adhere to a plan that would use increased tax revenues and increased federal spending to address domestic needs and entitlement programs.  Human Events chides many of the President’s initiatives as “frivolous projects.”   The House of Representatives believes that growing the economy, promoting employment, lowering taxes and allowing more discretion to the individual states will allow the U.S. to emerge from the “Great Recession.”

   The fate of the nation hangs on which side is correct, and which side wins this battle of the budgets. But total victory for either side before the 2012 elections remains completely unlikely.


Although Defense spending accounts for only 20% of the federal budget, The White House has targeted the armed forces (which have basically been deprived of adequate supplies of new equipment since the end of the Reagan era) to take 50% of all spending cuts. It has also been leaked that a radical and unilateral reduction in our nuclear defense posture is being considered.
In his budget, Obama has rejected the long-held doctrine that the U.S. must be prepared to fight in two separate regions simultaneously. The possibility of a large scale conflict with a powerful adversary such as China or Russia apparently has been rejected.
The President also advocates a unilateral and unprecedented 80% reduction of atomic warheads.  This would place the U.S. in a distant third place, behind Russia with its 6,000 warheads and on a par with China, leaving America vulnerable to ongoing intimidation from either of these powers as well as outright nuclear blackmail.
The proposal lowers U.S. nuclear strength to 1950 levels.  Strategically, this means that a first strike by an adversary could easily wipe out our arsenal, leaving the nation with no choice but surrender.
As the President attempts to enact his plan, Russia continues an ambitious military modernization program. MILPLEX  reports that China will double its announced military budget within the next five years.  North Korea and Iran are also moving swiftly ahead with their nuclear weapons programs.
In a bizarre twist, The Obama budget also cuts funds from Homeland Security, while increasing aid to Islamic fundamentalists in Egypt.
Last week, a group of military experts assembled by former Assistant Secretary of Defense Frank Gaffney noted that while the proposed defense cuts will slash our military capability, civilian DOD personnel will not be affected.  In other words, the fat will be spared while muscle is cut.
In the past, proposals to substantially reduce our national security posture would face stiff Republican opposition.  This year, the Republican Party is diverted by a fierce presidential primary battle, and it is being influenced by a small group of isolationists led by Ron Paul.
The end result of this proposed reduction to military spending may well cost far more than it actually saves. The impact of 100,000 low paid soldiers, sailors, marines and airmen returning home with very few available jobs will produce more expense in unemployment checks and related benefits than will be saved.  The fragile industrial base may not recover from the loss of military contracts. Numerous contractors and subcontractors will be forced out of business, destroying the recession-proof tax revenue and jobs they produce. Many of these businesses will close forever, meaning that future administrations would be powerless to undo the harm this reckless attack on our safety would produce.  To cite just one example, it has been estimated that New York State alone will lose almost 27,000 jobs.

Historians remind us that it was the pre-World War Two defense buildup that actually began to end the Great Depression. Gambling with our national safety is a poor bet at any time; doing so in an era of economic crisis is even worse.