Republicans will have far more credibility on budget issues, if they can convince voters that they are just committed to cutting waste, fraud, and abuse in the defense budget as they are in other areas of the budget.
Frankly, there is no other choice. Defense spending peaked in 2011 at just over $705 billion. By FY 2015, defense spending declined to $589 billion. This represents almost 16 percent of the federal budget in FY 2015 of nearly $3.688 trillion.
The Department of Health and Human Services (HHS) now has a budget of just over $1 trillion. Just over half of this budget was Medicare ($546.2 billion). A majority of the remaining HHS budget was the federal portion of Medicaid.
In FY 2015, Social Security was $887.75 billion. The growth of entitlement programs is not slowing down. We can only hope that the next president will enact pro-growth policies. With more growth, revenues can grow fast enough to keep the deficit from getting out of control.
A few years ago, my friend Van Hipp wrote a book called The New Terrorism. My late friend Peter Hannaford and I helped with some of the research. In his final chapter, Van spoke about how we need to achieve victory without bankruptcy.
He provided a few recommendations that I hope the next president will implement. One of the most important recommendations is a prospective payment system for defense contracts. According the Government Accountability Office (GAO), from 2001 to 2008, the Defense Department’s major acquisition programs altogether were over $300 billion from their initial estimates.
In the first Republican Primary Debate, Donald Trump said, “Our leaders are stupid.” When you look at how defense contracts are structured, there are only two possible conclusions: Our leaders are indeed stupid, or they are corrupt.
When it comes to the Defense budget, Americans could use a deal maker to take on the insane “cost-plus” contracts. Van Hipp proposed in his book a prospective payment system (PPS). There is a historical precedent for this idea.
In the early 1980s, Medicare was facing a similar crisis to the Pentagon today. From 1967 to 1983, Medicare hospital payments soared from $3 billion to $37 billion. Under a “retrospective cost payment system,” Medicare provided payments to the hospitals after services were provided. If hospitals knew they could charge Medicare, the incentive was for them to charge as much possible.
Medicare responded to this challenge by adopting a perspective payment system: Medicare created Diagnosis Related Groups (DRGs) to determine the cost per case. Under PPS, efficient hospitals can be rewarded for efficient services and inefficient hospitals have an incentive to become more efficient.
The cost-plus contracts provide no incentive for companies to be more efficient or to complete projects as quickly as possible. The longer a project goes, the more likely bureaucrats, politicians, and lobbyists can find ways to profit from expanding a project.
Another idea from Van Hipp’s book would be to make TRICARE an independent agency and take it out of the Defense budget. One of the reasons, the Department of Veterans Affairs is separate from the Defense budget is because members of Congress don’t want to have veteran’s benefits and wasteful defense spending lumped into the same appropriations bill.
The defense budget has to be separate from veteran’s affairs, because weapons systems need to be evaluated on their own merits. Because it is political suicide to vote against veterans’ benefits, defense contractors could force members of Congress to add wasteful spending in a defense spending bill.
TRICARE provides health care to our active-duty personnel. In 2012, TRICARE had a budget of $52 billion dollars.
Our soldiers’ health care plans should not be used as pawns to pass wasteful defense spending bills. If TRICARE, much like the Department of Veterans Affairs, becomes independent of the Pentagon, it will be easier for members of Congress to slash wasteful spending in the defense budget.
A third way to reduce wasteful defense spending would be to curb the conflict of interests in Congress. In 2010, it was reported that 19 of the 28 members on the Senate Armed Services Committee owned stocks and/or options with companies that held Pentagon contracts.
This form of bribery needs to be stopped. The Senate Armed Services Committee strictly prohibits their staff and presidential appointees having stock/options with companies that have Pentagon contracts. Members of the House and Senate should be held to the same standard.