If you have been following headlines, you have seen Trump take to Twitter to attack military spending. Between the bloated F-35 budget, the lavish expenses of a new Air Force One and the general overspending of the U.S. military, he has plenty to criticize.
While it’s easy to turn a blind eye to Trump’s Twitter account, this particular issue is equal parts important and impressive. This is an opportunity for Trump to make some big changes at an early stage, and the potential impact could just be the cornerstone of his ability to keep campaign promises.
Efficient Spending
This is the crux of it all. Trump is clearly right when he says the U.S. can increase its military might and improve the value it gets from military spending, and that all boils down to better efficiency. His attack on the Air Force One order is an easy example. He wants to cancel a $4 billion order for an airplane that is in no way vital to the success of the nation. That money can be better spent on increasing raw personnel or weaponry.
The attacks on the F-35 hold a similar impact. The project has gone over budget to unprecedented levels, and forcing contract winners to stay within budget creates a trickle-down savings effect. If Lockheed Martin has to work more efficiently, they will likely renegotiate with their subcontractors, extending the efficiency of each spent tax dollar. This sets a precedent that can apply to much more than just defense savings.
Taxes
Trump wants to cut taxes and increase government spending overall. The only way to sustain this is to apply better efficiency throughout the government. If he can create a template for reform with defense contracts, those can easily be applied to medical contracts to improve the Affordable Healthcare Act.
More importantly, that template could potentially set the standard for infrastructure contracts, dramatically impacting the bulk of Federal spending for the next four years. Ultimately, when tax dollars are spent effectively, that money returns to the economy, which is the core tenant of Trump’s plan for the economy.
Negotiation over Legislature
Effectively using “the art of the deal” extends much farther than just pushing promised reform. While the desire to improve efficiency is bipartisan, conflict arises fast as soon as Congress has to choose a program or contract that will receive fewer dollars.
Everyone’s specific interests are split, so enabling spending reform through legislation is in itself inefficient, and this is where Trump is already revolutionizing politics. With a small series of Tweets, he lowered Lockheed Martin stocks by roughly $4 per share, or just over half a point. This isn’t enough to seriously harm the company, but it forces them to respond to the public attention, and it can get them to at least partially fall in line, with no action from Congress necessary.
Ultimately, he isn’t changing the contract with Lockheed Martin at all, but he is pushing them to provide more return on already spent dollars. This is the chain reaction that creates tangible results, and the fact that Trump can achieve it before being sworn into office is stunning.
The Stakes
The real impact of these subtle political games comes into sharp relief when considering the sheer scale of the military budget. Take General Dynamics, for example. This is a single government contractor, and in 2015 they were awarded $11.8 billion in defense funds. Now, they have not been the source of overwhelming inefficiency scandals like some of the other companies mentioned, but if 10 percent of that budget were to produce tangible results as a result of Trump pressure, that amounts to $1.8 billion more dollars hitting the U.S. economy from a single contract.
The numbers scale up quickly. Most estimates put total military contract spending in the vicinity of $385 billion, out of a total budget of $597 billion. Since well over half the budget is spent this way, Trump’s negotiation tactics could easily free up tens of billions of dollars. This enables the military to effectively increase spending without taking in any additional tax revenue whatsoever, and this is why he has been saying all along that he can increase spending in many areas without bankrupting the government.
The pressure and tactics used so far can already have a rippling effect on government spending to the tune of tens of billions of dollars, but that really is a small beginning. This is the outline for Trump to possibly be the most effective president in U.S. history, implementing changes without writing laws and getting the U.S. government to begin to resemble a useful entity.
Regards,
Ethan Warrick
Editor
Wealth Authority
