How Else Would You Spend $320 Billion?

By Gene Sperling
Sunday, June 25, 2006

Most policy wonks like me have had the disconcerting experience of mistakenly writing $200 million when we meant $200 billion. What a difference a "b" can make ($199,800,000,000, to be exact). Unfortunately, when it comes to the most expensive choices our nation faces -- highlighted most recently by the growing cost of the war in Iraq, but also by tax cuts and the new prescription drug benefit -- we have made many spending decisions where the b's seem to be there by accident, with little regard for the possible tradeoffs.

For all the talk of how much government spending has increased, the reality is that for many policies that should top our agenda -- such as health insurance and preschool for low-income kids; funding for science and basic research; and port security -- we have decided that the money simply isn't there. We fiercely debate how we can scrimp and save and cut in these areas while ignoring commitments that cost 10, 25 or 100 times more. The new prescription drug initiative, for instance, will cost $110 billion in 2012 alone. The tax cuts will cost $330 billion that same year. And, as we have recently learned, the war in Iraq has cost $320 billion so far and is projected to reach $800 billion by 2016. Even if one solidly supports each of these policies, the lack of national debate over what even a fraction of the costs might mean for deficit reduction or other programs we have squeezed, or neglected, is striking.

War and security: The decision to go to war is not primarily a fiscal one. We should go to war when we have to, go it alone if we must, and pay whatever costs are necessary to protect ourselves. But that does not excuse us from understanding the tradeoffs that we have made by spending $320 billion on the war in Iraq. In the 1991 Persian Gulf War, a strong coalition meant the United States paid 10 percent of the costs; in the current war, we are paying 90 percent. By carrying such a large fiscal burden in Iraq, what are the tradeoffs we are making in our efforts to protect the homeland, fight terrorism abroad and win hearts and minds throughout the world?

For $7 billion a year we could reverse the recent controversial homeland security cuts for cities such as New York, Washington and Boston, and create a $6 billion initiative to safeguard our public transportation systems. For $15 billion a year we could double the size of our Special Forces to 50,000, reset the Army's essential field equipment and fund 30,000 more peacekeepers to promote democracy and deny sanctuary to al-Qaeda in key fragile states. And for $3 billion a year, we could be the unquestioned champions of universal education for the 100 million children in poor nations who are not in school. This would show the developing world that we care about the health and economic well-being of all children -- and not just about ensuring that their children do not grow up to bomb our children.

Drug-bill costs and health care: When it became clear, belatedly, that the projected costs of the prescription drug bill had ballooned to $100 billion a year, shouldn't that have provoked questions about what even a small fraction of that money could have done if used elsewhere? For $5 billion we could create a system of refundable health insurance tax credits for small businesses, reducing health insurance costs for 13.3 million Americans. With an additional $15 billion a year, we could offer health insurance to nearly all of the 9 million American children who lack it.

Tax cuts and competitiveness: There is no question that the right type of tax cuts can help the economy. But with recent tax cuts scheduled to cost more than $300 billion a year -- with $100 billion of them going to the wealthy -- shouldn't we at least ponder what some of that money could do if put elsewhere? For instance, without altering the size of the tax cut one penny, but by just shifting a small portion of it, we could create tax incentives to encourage Americans with no pensions or meager resources in the bank to save more. Shifting $25 billion a year could cover the cost of creating portable 401(k) accounts for 50 million Americans in which they could receive as much as $1,000 in federal matching money every year.

Consider four other areas where, with less than 10 percent of the eventual tax cut -- meaning about $30 billion -- we could help our economic competitiveness.

Science : There's no shortage of speeches these days about our failure to train enough new scientists. Yet funding for the National Institutes of Health -- the lifeblood for U.S. scientific research -- is scheduled to be cut in inflation-adjusted terms for the third consecutive year. Such cuts have led to reductions in grants, layoffs in research labs and declining morale. For an average of $7.5 billion a year, we could gradually increase NIH funding by 40 percent over the next four years, expand available grant money proportionately and keep scientists on the cutting edge.

Quality preschool: A recent poll found that 80 percent of senior executives at Fortune 1000 and other large American companies believe investing more in quality pre-K education is necessary for future economic growth. Yet federal cutbacks mean that there are fewer children enrolled in Head Start now than there were in 2002. For about $10 billion a year, we could offer quality preschool to all 3- and 4-year-olds from low-income families and expand what we do for those even younger.

Research and technology: Having helped spur the development of such U.S. technological achievements as the Internet, the personal computer, GPS technology and the algorithms that helped spawn Google, the Defense Advanced Research Projects Agency is a true success story. Yet we spend only $3 billion a year on it and its open-ended research, and there's some pressure now to de-emphasize basic research in favor of short-term projects. With an additional $5 billion a year we could double DARPA's budget and create an Energy DARPA to get us beyond our oil dependency.

Assistance for displaced workers: Virtually everyone agrees that we need to do more to help displaced workers. Yet recent initiatives have imposed such narrow, outdated restrictions that only 1,400 workers received help from a new wage insurance program in its first 15 months. There are no easy solutions for worker anxiety, but for $8 billion a year we could at least offer all displaced workers temporary health insurance and modest wage insurance.

The annual costs for all such programs are well below the costs to date of the Iraq war, or the projected cost of the drug plan or the tax cuts. But to paraphrase the late senator Everett Dirksen, $5 billion here, $5 billion there, and soon you are talking about real money. Let's examine the tradeoffs and make sure we fund our greatest priorities.

gsperling@cfr.org

Gene Sperling, who served as national economic adviser to President Bill Clinton, is a senior fellow at the Center for American Progress.


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