The President’s Dilemma: Deficits, Debt, and US Defense Spending

Project on Defense Alternatives Briefing Memo 45, 18 January 2010.


What can be said reliably is that:

    First, the level and duration of debt forecast by the administration, when taken together, constitute a historically unprecedented situation for the United States. Similarly, our global context is new and changing rapidly. We are entering terra incognita.
    Second, some of the assumptions and inputs on which the administration bases its plans and forecast are either bound to change or are contested. As noted earlier, a key component of its defense plan – the cost of foreign operations – is merely a “place marker” today. Perceived requirements due to the wars could easily add $250 billion in spending for 2011-2017. Moreover, the Congressional Budget Office analysis of the plan forecasts that it will yield larger deficits and more debt due to lower revenues and increased expenditures. It forecasts higher interest rates and, therefore, higher interest payments.
    Finally, regardless of the actual determinable effects of the government’s debt burden in the longer-run, the sudden growth of that burden and its persistence at a higher-level is bound to intensify political contention around budget and fiscal issues. The Obama administration will face intense pressure to economize in some areas.

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