John McCain’s Defense Cut
There is no more passionate and principled advocate for greater military spending than Senator John McCain, so we wonder if the Arizona Republican appreciates that he recently voted to guarantee weaker U.S. defenses. To wit, his vote to kill health reform means that entitlements like Medicaid will continue to squeeze the Pentagon like an ever-tightening vise long after he has retired.
Many in Congress have lamented that President Trump’s budget proposal for fiscal 2018 is more modest than the military buildup he promised during the campaign. He has requested $65 billion in the overseas contingency fund, and overall only 3% more than President Obama’s 2018 budget. This is a far cry from the Reagan defense buildup that helped win the Cold War.
The main reason is that the structure of federal spending has changed dramatically from the 1980s. More than 60% of the federal budget is now swallowed up by mandatory spending on Social Security, Medicare and other entitlement programs, up from about 25% in the 1960s and 42% in the mid-1980s. Interest on the debt absorbs another 6%. That leaves much less for the military, which has dropped to about 15% of the federal fisc from more than 25% in the 1980s.
This crowding out has become more pronounced as President Obama sought to protect entitlements from any cuts while pitting defense against discretionary domestic accounts like education and transportation. This was his explicit strategy in signing the Budget Control Act of 2011 that included annual budget caps for defense but not for entitlements.
As ObamaCare came on stream in 2014, spending on Medicaid in particular exploded. The Affordable Care Act dumped federal money on states that add working-age adults above the poverty line to government health-care rolls, and to no great surprise many have signed up. The feds reimburse up to 95% for every addition, whereas the rate is below 60% on average for the disabled, children and other vulnerable populations under original Medicaid.
As the nearby chart shows, annual federal Medicaid outlays rose from $265 billion in 2013 to an estimated $378 billion this year, and they are expected to keep climbing to $439 billion on current trend by 2020. It’s no coincidence that defense spending has fallen and then stayed flat over the same period.
By blocking the Senate bill that could have gone to a House-Senate conference, Mr. McCain blocked the chance to put Medicaid on a long road to sustainability and save as much as $772 billion over 10 years. Moderates helped kill reform with mendacious claims that the legislation would hurt the poor. Mr. McCain justified his killer vote because the Senate lacked an open process, though Senators had been discussing the details for months. Now the Medicaid blowout will accelerate, as states that have so far refused the federal bribe accept that the expansion is here to stay and sign on.
Mr. McCain has surely watched how entitlements have contributed to Western Europe’s shrinking military. As welfare, health-care and retirement subsidies soak up ever more of national economies, Germany and all but four NATO states lack the money or will to spend even 2% of GDP on defense. The U.S. was at 3.6% in 2015, according to NATO, and Republicans may boost that for a while, but watch that shrink toward 2% in the U.S. too as the Baby Boomers retire and ObamaCare goes unreformed.
When Mr. McCain cast his vote on the Senate floor, he was greeted by hugs and huzzahs from Democrats, and no wonder. They understood that the Senator had preserved their entitlement-state priorities at the expense of Senator McCain’s military buildup. We doubt this is the result and legacy that the patriot and former Navy pilot intended, but we regret to say there it is.
Appeared in the August 11, 2017, print edition.