Responses to Comments – Round 1

To Indiana Jim: Thanks for your question. I do not combine war
spending and entitlement spending. The former is in the so-called
“discretionary” portion of the budget; the latter is in the “mandatory”
portion (i.e., it is based on a predetermined formula set by past
legislation and will be paid out under that formula until it is
changed.)

To Freelance: Thank you very much.

To Adrian: Yes. Occasionally bribing foreign governments has been
used successfully, although it has been done covertly for obvious
reasons. But after 9/11, I don’t think we had that option with Al-Qaeda
and the Taliban in Afghanistan. And some terrorist movements are so
fanatical that bribing them is unlikely to work.

To John Thacker: I do not argue that current defense spending is
unsustainable. It could be more efficient, but the levels by historical
standards as a portion of GDP are quite low, as you point out. But this
will still be the second most costly war in U.S. history if it
continues to the end of the year. The cost of entitlements is, as you
point out, likely to grow, and these could squeeze many other programs
in the budget, including defense, in the next decade. They would have
to be reformed even if there were zero money spent for defense because
they are financially unsustainable.

True, FDR promised a balanced budget when he took office, but he
rapidly abandoned that pledge well before the war. But you are correct;
I was underscoring FDR’s call to make sacrifices at home to support the
troops on the battlefield through taxes, borrowing and the other things
you correctly mentioned.

To Barkley Rosser: I agree that Medicare presents a more difficult
problem than Social Security, which in fact, as you correctly point
out, enjoys a surplus. But neither is sustainable over coming decades
given the current trajectories of benefit payments and inflows. The
danger is that neither program will be sustainable without some
reforms, and the sooner they occur the less disruptive they will be.
The alternative is a bid increase in borrowing and/or taxes as well as
a drawing of funds from other programs. In all of these cases, we leave
our children a very bad legacy.

To Mr. Noah: What kind of guide do you need?

To Jay Livingston: Yes, I am. Great to hear from you. Where are you
living now? What great times we had together at Pocono. Hope you are
well. Best regards.

To Barkley Rosser: I agree with your May 28 posting in which you
said that the Social Security System is not in crisis, and indeed there
is a chance that it will not be for some time. But there is a high
probability that inflows will fall far short of benefits within a
couple of decades. That was the risk in the early 1980s, when with a
few changes the Greenspan Commission put it on a sustainable basis and
improved the chances that it would be there for many decades to come.
All I am arguing is for a few adjustments today, similar to those in
1983; to be sure that it is around for those who need it for a very
long time. And I do not want to see it reach a point where it gets so
out of balance that major change will be required, so let’s make minor
ones today.

More of my responses to your comments will be posted tomorrow.

Thanks again,

Robert D. Hormats
author of The Price of Liberty