By Christoph Bertram (eds.)
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Additional info for America’s Security in the 1980s
Thus, the Administration will have little choice but 24 to cut transfer payments, including social security, if it continues its planned defence build-up. Failure to achieve the non-defence savings, however, is only one of the risks for the planned defence build-up. Slower-thanexpected economic growth would generate less revenue and would increase spending for programmes such as unemployment compensation above projected levels. Furthermore, if interest rates continue to run at rates well above the rates forecast earlier this year, the projected interest costs for FY 84 would climb higher yet and thereby reduce the funds available for defence.
Moreover, planned force expansions will generate major increases in operating costs that cannot be trimmed in the short run without severe impact on readiness or risking the ability of the services to attract and retain the numbers and quality of military personnel they need. Some actions taken now can reduce the impact of future reductions in planned spending. For example: - Large weapons programmes should be staggered rather than funded concurrently. This will require hard choices in setting priorities, but is essential.
Historically, about 20% of the GNP has flowed to Federal Government in the form of taxes. Thus, if the GNP grows by 5% in a year, about I% will be available to support Federal programmes). The Reagan Administration has taken on an unusually difficult fiscal policy challenge. Taxes have been cut sharply, defence spending has increased, non-defence programmes have been slashed, and further cuts are promised. The President has sketched a broad plan to accomplish his objectives and in a few months has made considerable progress: - The tax reduction plan is in place, albeit modified and somewhat changed from his original proposal; - The FY 81 and FY 82 Defense Budgets have been increased by 4% and II% respectively, and future planning is based on an assumption of7% real growth in funds; - Non-defence programmes have been pruned severely in many cases, yielding outlay savings of $46 billion in FY 82 (roughly 9% of total non-defence spending); Nonetheless, many uncertainties remain.
America’s Security in the 1980s by Christoph Bertram (eds.)