That’s but one indication of the extent to which the U.S. defense budget has ballooned beyond what the nation can afford in an era of long-term budget deficits and high unemployment, Rep. Barney Frank, D-Mass., told a group of Tuck students during a visit to the school September 16.
“I’d feel happy if the Navy was tied for third,” said Frank. “There is no scenario for reducing the deficit over the long term, which keeps military spending at the current level.”
As Republican presidential candidates campaigning in New Hampshire debate the merits of cuts to social security and health care spending, Frank says defense cuts and tax increases for the wealthy are better ways to help the country balance its books without exacerbating inequality. The cuts would entail closing bases from Germany to Japan and would mean U.S. allies pay a greater share for their security.
First elected to Congress in 1980, Frank’s work as chairman and ranking member of the House Financial Services Committee has earned him both national recognition and scrutiny. He sponsored Congress’ most significant legislative response to the financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act, which became law last year.
But Frank chose to focus his remarks on the rationale for cutting the military. At nearly $700 billion last year, the U.S. accounts for more than 40 percent of the world’s military spending and has a defense budget greater than the next 14 countries combined.
Such spending persists because the U.S. suffers from a “cultural lag” from the Cold War era, Frank said. Two decades after the fall of Communism, the U.S. continues to fund three major programs designed to defeat the Soviet Union: the Army’s intercontinental ballistic missile system; the Air Force’s Strategic Air Command of long-range bombers; and the Navy’s nuclear submarine program. “Let’s keep two and we’ll save tens of billions of dollars,” he said.
The U.S. military presence in Germany is equally indefensible, Frank says. Following the end of World War II, a large U.S. military force was needed to deter the Soviets from attacking the poor and weakened countries in central and Western Europe. Those conditions have long since vanished. “The nations of Western Europe are no longer poor and weak, they are wealthy and strong,” said Frank. “There is no more Soviet Union … we are committing tens of billions of dollars to the defense of strong countries against nobody.”
While defense spending as a percentage of gross domestic product declined from 5.9 percent in 1990 to 3.6 percent in 2000, it returned to 5.8 percent in 2010. President Obama shares blame for this by choosing not to end wars in Iraq and Afghanistan sooner, Frank added.
On the topic of finance, Frank defended provisions of the Dodd-Frank financial reform bill. The single greatest cause of the 2007-2010 financial crisis was that home-loan lenders were allowed to package mortgages together and sell them on to another bank without retaining any of the risk themselves, said Frank. That created incentives for lenders to issue mortgages quickly and without regard as to whether they would ever be paid back.
The new law requires lenders to retain five percent of the risk of some of the loans they issue. That requirement has drawn criticism from smaller banks, who view it as burdensome because it means retaining enough capital to back the loans. “What people are saying is, ‘I’m not going to lend anybody any money if I have to keep even five percent of the loan,” said Frank. “In general, people shouldn’t be lending money that they don’t have.”