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DubStyle311 · 10-05-2007, 11:33 PM

Interesting chart I saw in the paper this week. It shows military outlays and military spending as a percentage of GDP. Plus it shows how bad Clinton starved the military in the 90s. Even with all the costs associated with Iraq, were not even back to the pre-clinton levels.

Quote:

A War Surtax?
October 4, 2007; Page A18

Congressional Democrats have tried about every possible ploy to "end the war" in Iraq, albeit without having to take responsibility by cutting off funds. Now in their frustration, they're trying to revive an LBJ golden oldie -- a war "surtax."
[Chart]

House Appropriations Chairman David Obey entered Congress in 1969, so perhaps he had a Vietnam flashback this week when he announced the new tax to "pay for" the war in Iraq. He was joined by fellow House spending barons Jack Murtha and Jim McGovern, who said they hope to raise $140 billion to $150 billion annually by imposing a new 2% baseline levy on almost all taxpayers, ranging up to 15% for the highest brackets. Now, that's a surtax.

Their argument, echoed often in the media, is that such a tax is needed because war spending is busting the budget and crowding out domestic priorities. Iraq "will result in draining the Treasury so dry that it will result in systematic disinvestment of America's future," Mr. Obey says, with his customary understatement. "We need to stop pretending that this war doesn't cost anything." Someone's pretending, all right, but it is those who claim that Iraq spending represents some unique and overwhelming fiscal burden.

In fact, the U.S. is spending relatively little on defense by historic wartime standards, and that's including the $192 billion in 2007 to fund the efforts in Iraq and Afghanistan. It's true that overall defense spending, in dollars adjusted for inflation, is higher than it was during the 1990s. And thank heaven for that. Defense spending as a share of the economy in the Clinton years dipped to its lowest level since 1940, as we lived under the illusion of a "peace dividend" while al Qaeda was gaining strength.

The nearby charts illustrate the defense budget picture since 1989, and the end of the Cold War. The bottom chart shows that, as a share of the overall economy, defense spending fell almost in half to 3% of GDP from 1999-2001. It has since climbed back to 4%, and may hit all of 4.2% once final figures are in for fiscal 2007, which ended last week. That's still far below the peak during the Reagan arms buildup of 6.2% in 1986, and less than half the Vietnam peak of 9.5% in 1968.

But isn't the war in Iraq crowding out urgent domestic needs? Not even close. As the top chart shows, defense spending in 2007 will probably come in at 19.7% of total federal outlays. The Bush Administration request for fiscal 2008 is 20.1%, which is still below what it was (21.6%) in 1992 when Bill Clinton was elected; as recently as 1987, it was 28.1%. Mr. Clinton and Congress slashed that defense share to 16.1% in 1999, before they began to remember that the world remains a dangerous place.

If you're beginning to suspect that this fight really isn't about Iraq, you've broken the Beltway code. As House Appropriations impresario, Mr. Obey has committed himself to passing spending bills for fiscal 2008 that surpass President Bush's discretionary spending target by $22 billion. He's thus trapped himself between a veto threat and the pent-up spending demands of his liberal constituencies. His "surtax" gambit is an attempt to change the debate by blaming his predicament on the costs of an unpopular war.

Mr. Bush isn't buying this, and neither should taxpayers. The federal budget deficit continued to decline in fiscal 2007, to something close to $165 billion, thanks to another year of buoyant revenue gains of about 7.5%. Those revenues flow from a growing economy that Mr. Obey's surtax would hit like a two-by-four.

If Mr. Obey wants a tax increase to fund more domestic spending, he ought to be honest and say so. His problem is that this wouldn't be as politically easy as blaming Iraq, and it wouldn't even be popular with many of own Democratic colleagues. Speaker Nancy Pelosi proved that when she quickly disavowed the Obey-Murtha-McGovern surtax on Tuesday. At least some Democrats have met a tax increase they don't like.

URL for this article:
hxxp://online.wsj.com/article/SB119146139105348517 .html