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Defense Secretary Chuck Hagel meets with his Senior Leadership Council at the Pentagon, Oct. 24, 2013.
The recent paralysis in Washington underscores the profound risk of managing from crisis to crisis. But even though the shutdown and the debt-ceiling battle are barely behind us, there’s another crisis in the offing: The next round of automatic budget cuts mandated under sequestration, and the devastating economic consequences they will bring.
Over the past few years, the focus has been on resuscitating the U.S. economy, and rightly so. But trepidation about our economic well-being has fueled a mindless willingness to slash “elective” spending such as defense, and retreat from global leadership. In January, we’ll do it again, slicing a $52 billion tranche out of a national defense budget that has already sustained more than $1 trillion in cuts. But what the American people won’t be told by the coalition of budget-cutters and neo-isolationists that favor starving defense is that these cuts don’t only harm national security, they will weaken the economy.
The most obvious impact of the defense cuts on the economy is the loss of jobs in the private and public defense sector, but there are even greater negative economic effects that are less visible. The U.S. military’s stabilizing presence in critical parts of the world has been one of the engines of the extraordinary global economic growth since World War II ended. Consider just as one example the unique role of the U.S. Navy in protecting the safety and freedom of international maritime commercial traffic that has enabled trillions of dollars of American and foreign-made products to be sold around the world, created tens of millions of jobs here in America and lifted hundreds of millions worldwide out of poverty.
Counting the wars not fought, the children who didn’t perish, the tyrants who didn’t prosper and the economic exploitation that didn’t happen is a magic act that cannot be performed. Nor is it simple to paint a picture of an Asia dominated by Chinese rules of engagement, or a Europe under Russia’s thumb, or an Africa and Middle East torn asunder by Al Qaeda. These are the things that American power can deter. There are enormous human and economic benefits to avoiding these scenarios.
History should be our guide: Between 1850 and 1913 — the golden age of industrialization — real growth in the global gross domestic product averaged 2.1 percent. Between 1950 and 2007, the era of American military and economic leadership, global growth was almost double that at 3.8 percent, representing trillions of dollars. Global trade skyrocketed as well: In the century before 1950, trade grew 3.8 percent. Since 1950, global trade has grown 6.8 percent. Most important, that growth was not restricted to wealthy nations but was spread more broadly around the world than ever.
Short-term savings in reduced defense spending can be measured much more exactly than the long-term costs of those cuts. For instance, consider the impact on commodity and energy prices if the U.S. Navy were no longer able to play the critical, stabilizing role it has in providing maritime security in the Strait of Malacca (through which 40 percent of world trade passes) and the Strait of Hormuz (through which 40 percent of globally traded oil goes). The effects of such a failure are hard to quantify accurately, but we know enough to conclude they would be economically catastrophic.
Doubters will wonder whether the currently enacted, ongoing cuts to defense are sufficiently severe as to justify our concerns about such a catastrophe. And the answer is yes.
If the new 2014 cuts to defense required by sequestration remain in place, a steady but severe decline in military readiness and operational effectiveness will be the result. In a 2011 letter to Congress, then-Secretary of Defense Leon Panetta enumerated the devastating impacts of sequestration on the U.S. military: The Navy will shrink to a fleet of fewer than 230 ships, its smallest since 1915; our ground forces will be smaller than at any time since 1940; and the size of our tactical fighter force will be the lowest since the advent of the U.S. Air Force. The longer these cuts are in effect, the greater the impact to the readiness and effectiveness of our armed forces will be. The world will become more unstable and unpredictable, inevitably making our economy weaker and more vulnerable.
It has been nearly 70 years since we and our allies met at Bretton Woods, N.H., to lay the foundation for the modern global economy. Then, as now, the strength and global presence of the American military promised that what was agreed upon would be implemented and that the stability necessary for economic investment would be guaranteed. The enormous growth since then shows how closely American prosperity is tied to American military strength and global leadership. All that is now at risk.
There’s another crisis in the offing: The next round of automatic budget cuts mandated under sequestration, and the devastating economic consequences they will bring.
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