Annapolis Institute Overview


Peace dividend can pay U.S. debt

by Phil Burgess, Unabridged from the Rocky Mountain News, February 8, 1990

The vitality of the pro-democracy movements in Eastern Europe and the Soviet Union is causing military and civilian intelligence agencies on both sides of the Atlantic to overhaul their estimates of the Soviet threat. Many think diminished threats to American national security should be reflected in the nation’s spending priorities.

Estimates of the size of the peace dividend vary from $5.7 billion a year in President Bush’s proposed budget to former defense secretary Robert McNamara’s estimate of $150 billion a year.

Congressional longknives would achieve savings of about $30 billion a year by deep cuts in weapons procurement and by bringing home U.S. troops in Europe or South Korea.

This is attractive because it helps avoid base closings at home. The NIMBY (not in my back yard) principle applies as much to defense spending cuts as it does to the location of a waste-disposal site.

Although the size of the peace dividend is unclear, there should be some savings, assuming pro-democracy movements continue.

Will savings come fast enough and have a major impact? Probably not. That is not characteristic of the way the government does things.

Will these savings be absorbed by “the system” before we see them? Probably. Remember the Vietnam peace dividend? It evaporated before our eyes.

As Jack Beatty points out in the February issue of The Atlantic, claimants for the peace dividend already are lining up. Some would use up to $300 billion to clean up Rocky Flats and other nuclear-weapons production facilities.

Others would spend it on infrastructure: $40 billion over a decade to repair and replace aging bridges and other public installations, and $25 billion to modernize the air traffic control system, for example. Others would take billions to expand social programs such as Head Start and Food Stamps.

There is, however, another alternative: Use the peace dividend, however large and whenever it comes, to stop federal profligacy and reduce the federal budget.

The budget deficit also requires us to keep interest rates, which make it harder for middle-class Americans to buy a house or car. These rates depress long-term investments, and slow down economic expansion, job creation and innovation in every major industry.

The budget deficit also requires us to keep interest rates high so we can borrow from abroad to pay our bills, adding $25 billion to $35 billion a year to our trade deficit and making it easier for foreigners to buy up America at bargain basement prices.

The budget deficit is costing us more than $240 billion a year in interest payments, more than we spend on any other domestic program, including Social Security.

Congress needs to balance the budget, pay down the national debt and put our fiscal house in order. Balancing the budget is the best way to use the peace dividend.

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