Defense spending

On Tuesday the Senate passed an amendment to the Defense Appropriations bill that stripped $1.75 billion in funding for the F-22 Raptor program.  The military will end up with just 187 of these amazing fighters.  While opinions in the Pentagon seem to vary, in the past officials have estimated we need 250-380 to maintain air supremecy and preparedness into the forseeable future.  To borrow a phrase, I think the Senate has "acted stupidly" here.

First of all, the Raptor is awesome!  It is far and away the best fighter jet in the world.  That may not always be the case, but for the moment nothing can match it.  This is not really in dispute.  Having a full arsenal of these bad boys provides the U.S. a huge advantage over the rest of the world. 

Second, the critics of the F-22 point to the F-35 as a better alternative.  This is just ignorant.  The F-35 is slower and less agile.  It is not designed for the same purpose as the F-22, being more suited to Air-to-Ground assaults than Dogfights.  The F-35 is not ready for production and won't be for years - it's already behind schedule.  The trump card, however, is that the F-35 is a Joint Strike Fighter - part of a program in which we share in the development of the fighter jet with other countries.  The F-22 technology is all American; it is against the law to be sold abroad.  All things being equal, shouldn't we prefer to stock our military with weapons no one else can duplicate? 

Third, in a time when the administration is desperate to pump stimulus into the economy and "save jobs", the F-22 program is the very definition of effective stimulus.  The various stages of production for the F-22 employ 25,000 Americans.  The $1.75 billion is a mere .2% (that's two tenths of a percent) of the funding authorized in the Stimulus bill earlier this year - and a fraction of the funds set aside in that bill for ridiculous high speed rail lines from LA to Vegas. 

This is another example of Democrats just not looking closely enough.  And America suffers as a result.  Hopefully, we can find a way to resurrect the F-22 program yet.

Also, check out this nice piece on the memes employed in the debate over the F-22 (spoiler: they don't hold up to facts):

http://www.aviationweek.com/aw/blogs/defense/index.jsp?plckController=Blog&plckScript=blogScript&plckElementId=blogDest&plckBlogPage=BlogViewPost&plckPostId=Blog:27ec4a53-dcc8-42d0-bd3a-01329aef79a7Post:338b1664-f6f7-4795-939b-16536947dafb

Since none of our so-called leaders are going to present an alternative economic recovery package, I'll do it myself.  Items are in no particular order except the order in which they came to me.

1) Slash the Corporate Income Tax Rate to 15% - The United States currently has the Second Highest Corporate Tax Rate in the World.  This puts our companies at a gigantic competitive disadvantage internationally and retards both job growth and the stock market here at home.  Cutting corporate taxes will spur a business led investment boom in the United States.

2) Make Bush Reductions in Capital Gains and Dividends Permanent - While I would love to slash these grossly counterproductive rates further, that's not feasible politically at the moment.  The next best thing would be to send a permanent signal to financial markets.

3) Abolish the Employer Half of the Payroll Tax - As liberals frequently point out, 80% of taxpayers pay more in payroll taxes than income taxes.  They deserve a big tax cut.  This will also act as a major job creation mechanism.

4) Pass Colombia, South Korea, and Panama Free Trade Agreements - This move is more symbolic than substative, however, it is crucially important.  Passing these agreements would signal to our trading partners that the United States will not turn protectionist like we did in the 1930's.

Passing the Colombia agreement would also weaken an increasingly despotic Hugo Chavez.

5) Establish a 15% flat rate on All Income - This will leave Americans with more money to spend, invest, or do whatever the heck they want to do with it.  It will also do away with the deadweight loss from tax code complexity.  Many other Countries have done this successfully.

Should this prove politically unfeasable, we should still strive to do this for everyone except the top income tax bracket.

6) Create A National Market for Medical Insurance - Rising Medical Costs have been a major economic drag for the past decade.  While the reasons for this are worthy of their own blog post, creating a national market for Medical Insurance instead of 50 separate state markets is the easiest way to lower costs.

7) Drill, Baby, Drill - In addition to harming those nice guys in Tehran, Moscow, and Caracas, increased energy production at home will create oodles of jobs.  It might even make the auto bailout a moot point.

8) Immeadiate Expensing for Business Investment - This will also create a boom in business investment.

9) Boost Defense Spending - This is a policy I support for other reasons.  That said, defense spending has a higher Keynesian Multiplier than anything President Elect Obama is proposing.

10) Abolish the Alternative Maximum Tax - This wildly unfair tax should just be abolished.  I don't care about the rationale.

11) Abolish Sarbanes/Oxley - This onerous regulation, passed during the Enron panic, drives capital and businesses overseas without preventing fraud at home.  Repeal of SarBox would ignite a stock market boom!

12) Abolish Mark to Market - This obscure accounting rule forces companies unnecessarily to lower the value of their assets relative to what they could be sold for.  This was a major factor in the credit freeze.

13) Abolish the Death Tax - Any change in tax policy that both antagonizes liberals and hurts Warren Buffet must be a good idea.

My friend and colleague, Patrick Ottenhoff, had an interesting analysis of Virginia back in June that could be on the money:

Major federal contractors set up shop in Northern Virginia and, in turn, subcontracted work to technology firms that hired accountants and lawyers. The young professionals who work at those firms in Tysons Corner, Reston and Ashburn are part of Obama’s core constituency. But the ideology and lifeblood of many of these firms is rooted in continued defense spending — one part of the Bush legacy that McCain would be sure to continue. In an election in which Republicans’ Iraq policy will hurt McCain in almost every state, his bullish foreign policy could actually help him in some quarters of Virginia.

Let's forgive Pat for missing the economic crisis and improvement in Iraq and focus on the basic economic point for a moment. When Barney Frank said that he would cut defense spending by 25%, both resonating with an image of Barack Obama and particular statements, an opportunity was created.

Significant defense cuts have the opportunity to creat massive economic dislocations for people and communities. And they know it. Just look at the terror in Northern Virginia over BRAC. John McCain's campaign figured this out. This is basic paycheck issue for a lot of hard-working people. Suddenly, Barack Obama's "radicalism" means something to real people. Let's look at some numbers.

The key thing to realize hereis that you can cut ads in these states and people will get it. Imagine scripts like these:

Barack Obama doesn't just endanger our national security wtih his untested ideas, he  endangers [state]'s economic security.  In [state], that means [jobs] jobs. And it just starts there. When you remove those jobs from [state] everyone suffers from even lower house prices to the damage done to small businesses.

These can be supplemented with statements by local politians who, inevitably, fell over themselves to talk about BRAC and the damage that removing even one office at one military base, or even civilian office, would do to the community.

This is an issue that, when tied with Joe the Plumber and whatever crazy ACORN or whatever else stuff pops over the weekend can resonate with John McCain's underlying message. These are real issues. Barack Obama is talking about "change", while John McCain is talking about what's in your pocket-book. That's something that people understand and that we need to nail the last 5 days of the campaign.