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  • The Links Between Economic Freedom and American Leadership in International Security

    The 2011 Index of Economic Freedom is out, and the news is not good. For the second year in a row, America became less economically free. The U.S. is now just the ninth-freest economy in the world. The decline in the U.S. ranking was driven by skyrocketing government spending, new regulatory uncertainty associated with Obamacare, and government intervention in housing and financial markets.

    Economic freedom matters for many reasons. It is the way societies create wealth: government is necessary, but it provides only the framework within which autonomy can flourish. It is also an inherent liberty: the right to do what you will with the fruits of your labor is among the most basic of human freedoms. As the Index demonstrates, economic freedom also correlates strongly with overall well-being, cleaner environments, and democratic governance.

    Promoting economic freedom abroad, and practicing it at home, is also a basic responsibility of American leadership. This is true for a fundamental reason: as the United States falls down the ranks of the economically free, it will, over time, lose the ability to play the leading role as the world’s most powerful democracy. If the U.S. is to provide for its own defenses, and that of its allies, it must be able to pay the resulting bills.

    Economic freedom is not just a pocketbook issue: it is fundamental to American security. For the sake of its leading role in the world, as well as the prosperity of its citizens, the U.S. must return to the ranks of the economically free.

    America International Leadership Rests on Its Dynamic Economy

    All capitalist economies, including the American one, go up and down. Recessions are disturbing, but necessary: a completely stable economy would be a stagnant one. In economics, as in other areas of life, a price of freedom – and the opportunities and growth that come with it – is the need to accept maturely that complete safety is unattainable. Government efforts to provide social insurance, in all its forms, must be balanced by recognition that such efforts reduce economic and personal freedom.

    Historically, American international leadership after World War II was predicated on the correct belief that political and economic freedom and progress were interdependent. The U.S. decided to move away from protectionism, and encourage other countries to do the same, to prevent another Great Depression and the accompanying rise of totalitarianism. But now, instead of the U.S. driving the world’s move towards economic freedom, the U.S. is holding the rest of the world back. This is a rejection of the U.S.’s successful, bipartisan post-war grand strategy.

    The United States cannot be a world leader if it has a stagnant economy. Even slower economic growth, over time, will take a severe toll. It is disturbing that, in the 2011 Index, North America (dominated economically by the U.S.) and Europe (the home of most of the U.S.’s traditional allies) declined or held level, while the rest of the world, containing its developing powers, gained economic freedom.

    Over the long run, this trend will mean that the U.S. and its allies will grow more slowly than the rest of the world. So far, it is Western Europe’s share of world output that has shrunk most dramatically as China’s has risen, but the U.S. is not immune to the European – and, increasingly, the British – desire to seek safety over growth.

    Defense Spending Is Not The Cause of Declining Economic Freedom

    One quick, easy, and incorrect response to declining American economic freedom is to reduce federal spending by cutting the defense budget. This ignores two vital realities. First, and most importantly, the U.S. spends money on defense because it is a primary and central duty of the Federal Government to protect our sovereignty, our freedoms, and our interests.

    Second, defense spending as a share of total government spending, and of U.S. G.D.P., has declined over time, and is now at or near post-1945 lows. The U.S.’s budget deficit, and the many other policies that are making America less economically free, are not driven by defense spending, or by the wars in Iraq and Afghanistan. They are driven by the social and entitlement spending that consumes by far the largest share of the U.S.’s budget.

    It is certainly true that defense spending, like all government spending, imposes costs on the American economy. And it is also true that the necessary funds allocated to our defenses should be spent as efficiently as possible, and that America’s allies under-invest in their own security. But blaming ballooning defense spending for the growth of the federal government is simply incorrect.

    In the Long Run, Economic Freedom Makes Everything Easier to Afford

    The power of economic growth compounded over time is amazing: over a generation, even a marginal decline in growth makes Americans startlingly less well off. Slower economic growth is not only undesirable in itself, it forces many difficult budgetary choices. It means lower tax revenues and, if accompanied by higher borrowing to fund social spending, higher interest payments.

    It is easy to claim that any particular government intervention or program is necessary, but the end result is that, slowly, economic freedom is whittled away, and the choices that we will have to make in the future become more and more painful. The pressure on defense spending, and, more broadly, on America’a role as the world’s leading democracy, will be particularly intense, for the simple reason that social spending will always have many highly-motivated lobbyists – those who receive benefits – working on its behalf.

    The events of recent months have made this painfully obvious. Alone among the major departments, and after an epic spending blowout on social programs, defense has been targeted for cuts. One recent survey of public opinion found that cutting defense spending receives the support of about half the American people: only scaling back foreign aid and cutting the IRS’s budget is substantially more popular.

    While foreign aid should be cut, and the IRS is understandably unpopular, the fact is neither defense, foreign aid, nor the budget of the IRS places an unsustainable burden on the American economy. The public support and political enthusiasm for targeting them is a reflection of the choices that America’s declining economic freedom is beginning to force. Unless America returns to the path of economic freedom, these choices will only get harder in the years to come.

    What the United States Must Do

    When asked why he robbed banks, Willie Sutton said “Because that’s where the money is.” If Americans want to save money, restore their country’s economic freedom, and give the next generation a stronger economy, they need to start by understanding where the money is. After the epic debate on Obamacare in 2010, the answer should be obvious: it is in the entitlements budget.

    The United States, and the American people, must recognize that defense spending is a core function of government, and that economic freedom, national security, and American leadership in the world, go hand in hand. The United States must enact policies that will reform entitlement spending and advance economic freedom at home and abroad.

    Over the long run, these policies will provide the resources to allow the government to fulfill its necessary functions, the American people to improve their lives, and to sustain U.S. leadership, and to defend America, its allies, its interests, and its freedoms.

    Posted in Security [slideshow_deploy]

    7 Responses to The Links Between Economic Freedom and American Leadership in International Security

    1. George Colgrove, VA says:

      This is the very basic nature of this debate.

      We have all agreed that we have robbed our grandchildren’s future with the near $14 trillion debt. We have a debt just about 6 times our expected tax revenue. No household could ever operate like that. We have robbed our grandchildren for our own personal desires, pet projects, inefficient programs and whatever the feds spend that debt on.

      Here is the question, after we have satisfied our generational greed for taxpayer’s nonexistent cash, what will our grandchildren use to fund the almighty federal government? We will not fix a dime’s worth of problems for 2011. The drunken greedy take of tax dollars is already in place and cannot be stopped. We are poised to spend over $1 trillion in debt again this year. It is likely by the Fiscal Year 2012 comes around we will be approaching if not exceeding $15 trillion. If we decide to smarten up today – this morning, our children and their children will have an annual handicap of a trillion dollars to pay back for our stupidity. This will be before they can start paying for their own needs. Moreover, what happens when the next 9/11 happens – it could be a massive earthquake, a terrorist attack or something even worse. Our “fix at all cost” mentality – our “money is no object” methods have stolen their ability to address serious issues in their time.

      The adolescence that is running amok in the federal halls in DC is stealing the country’s future away. My kids and their kids will have to cough up a trillion dollars more each year to keep their government afloat.

      Everything points to one thing and that is we are done with the excessive spending. We now have an annual budget item of paying off the principal and the interest of our national debt. This item will for two generations eclipse each of the DoD and the HHS budgets and perhaps even both added together. The amount they will have to pay back in a year will equal what the entire federal budget was over 20 years ago. All of the things each federal departments would have wanted to do or buy or whatever are now gone. It would have been nice to have those things – i.e. missile defense system. But we have spent our load.

      We went to the carnival – we had fun. We went on every ride, and we even drove up our credit cards to do it all. However, we just saw that a new carnival went up over on the other side of the street – and our pockets are empty and we have no more space on our credit cards. Would it be great to venture over there – sure, but we can’t get through the gate.

      The government could have made wise choices over the last decade, but they did not. Massive building projects, bailouts and so on. Rush Limbaugh reported that there are 68 “Early Education Initiative Programs” throughout the federal government. We do not even need one!

      We can turn this around, but we need to start today. Not by some small token measures, but by meaningful, deep and painful cuts. Last year the feds were short 36%. The 2011 tax revenue is estimated to be the same (if we are lucky) as 2010. The federal budget went way up for 2011. We will be over 40% overspent this year.

      If we care about the children, if we care about their children, we will stop loading up on them. They will need to solve their own problems on top of cleaning up ours. If they hate us for what we have done to them and the burdens we put on them, they have full rights to do so. The feds have betrayed today’s America – yes. However, if we the people do not do the necessary things to seize control over those feds, we – and it will be us – we will be betraying the future generations of this country due to our inaction. The feds have already shown their colors and as such, they cannot be trusted to fix this – we are done with them. We need to be on congress to legislate our way out of this in an open and honest way.

      We need to meet our obligations because we are Americans. We cannot default on that debt. One day we will be debt free and we will have a booming economy and we will have a secure nation. But we cannot be those things or have those things with the current federal class and their wasteful mindset.

    2. Cauthon, Deering, NH says:

      Always enjoy seeing our people on Fox etc. (sorry I didn't take notes, can't remember his name, from just a few minutes ago).

      A couple more thoughts on the current emergency:

      - Pres. O said that raising the debt ceiling would be a failure of leadership, when he wanted to vote against it (for camouflage, I suppose). Now it is not a failure of leadership, it is affirmation of his leadership; the problem is, he is leading us in the wrong direction. He marches to a different drummer – perhaps several drummers, Marx, Lenin, Alinsky, Ayres, Wright, etc.

      – Why is nobody talking about raising the debt ceiling by some small, minor, minuscule amount, say, $100,000,000,000, instead of a whole $trillion at one swell foop?:-) That would minimize the damage, if the new ceiling holds, or, it would bring back the whole debate if we have to go past that level. I do not expect to solve all our problems in the next couple of months, and anything that keeps the issue hot should promote more debate.

      Hope that helps

      • Brandon Stewart Brandon Stewart says:

        Cauthon: Thanks for your comments. Glad you enjoyed Rory's segment on Fox. You are definitely right that there are some different ways to tackle this debt ceiling issue. Check out this factsheet for several options we've suggested (including the one you mentioned of spreading the votes out).

    3. George Colgrove, VA says:

      I went over the “How to Reform the Department of Defense Budget” report referened in the article and am very impressed. It is very thoughtful and all of this should be implemented immediately. I only add the following when looking at the federal government at a global level:

      1. Consolidate all payroll and human resources function to a central federal agency (i.e. GSA). Not only will this remove this non-military expenditure from the defense department, but it will also help consolidate the department of agriculture’s payroll service and the few others that exists within the federal government. The DoD should not be wasting its valuable time performing payroll and human resource functions.

      2. Consolidate all open government initiatives to a central federal agency (GSA). Again, they will not need to manage this non-military function.

      3. Consolidate all passenger automotive and bus fleet functions under the GSA. From what I see the DoD and the DHS are the only two non-GSA departments that has their own fleets – these should be brought under the single auto fleet section within the GSA. There is no need for DoD civilians to be used for a task already being done elsewhere.

      4. All media, marketing and other public relations functions could also be consolidated under GSA as well. This could also include the management and coordination of recruitment activities. Albeit, military folks would have to participate in partnership with the GSA.

      5. Create a cost effective – minimum risk work environment. Revamp and tighten access to classified information. Create a secure centralized robust declassification program that has checks and balances. Use military personnel who have direct field experience and specific education with the subject matter. The rest of the administrative offices and most non-administrative offices would then be working with declassified information. This will allow the DoD to use cost effective standard business practices and equipment with little risk of the kind of enormous leaks we have been seeing as of late. This will also help reduce the massive costs incurred because of the extensive and invasive background checks for the DoD staff which is currently piling up in a massive backlog.

      In short, if the task is administrative and does not have a direct military-purpose, find a way to consolidate it with the same type of function within the rest of the government. This not only will relieve the DoD budget from the perpetual drain of these redundant non-military tasks, but also will help out the entire federal government in general. Use the GSA for its intended purpose. Acting as a single consolidated department, servicing the needs of the entire federal government in a cost effective and efficient manner.

      Moreover, with items 1 through 4, these services can be packaged up and easily contracted out to private sector companies at a much lower cost in the same manner as you described in the report for non-combat duties moving from military personnel to civilian workers.

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