Getting a Piece of Peace Dividend

Only one thing in Washington is multiplying faster than estimates of how big the peace dividend will be when the Pentagon budget is cut as the Cold War winds down. That’s the number of people who know exactly what to do with the money.

Defense analyst William Kaufman startled Washington late last year with an estimate of defense savings of $150 billion a year by the end of the decade. Now some analysts are calling his projection moderate. That may well be the case once the Pentagon gets around to shrinking its forces to match a shrinking global threat.

The most recent proposal comes from Sen. Edward M. Kennedy (D-Mass.), who wants to put the defense savings into a trust fund to finance domestic programs such as education, health care, transportation and the like.

Kennedy’s idea of a National Needs Trust Fund is attractive in one sense. It would prevent a peace dividend’s oozing willy-nilly into domestic programs as did 100 billion present-day dollars after the Vietnam War. The money was not all wasted, but neither did Congress weigh carefully whether there might be better ways to spend it.

Times have changed. Congress doesn’t need the crutch of a trust fund because it long ago saw the peace dividend of 1990 coming and is already debating alternative ways of carving it up. Besides, over time, various trust funds like that for highways have wound up trapping money that is needed somewhere else.

Washington cannot yet commit itself to a pattern of spending because how, and even whether, the nation grows over the next few decades depends on getting the formula right, and there are too many uncertainties for that now. Kennedy is generally right about the priorities. He is right also that a peace dividend alone cannot pay for all that needs doing. The nation will have to add higher taxes to the package to buy better roads and bridges, wipe out drug abuse, build housing for the homeless and catch up with many other needs.

Washington also will have to be very careful not to slight the share of the peace dividend that must go toward drying up the federal budget deficit. During this fiscal year, interest on the national debt alone would eat up all the peace dividend that is likely to exist in the budget 10 years from now. As long as that goes on, there is virtually no hope of getting interest rates down to the point where American industry can make investments on the scale that it needs to compete globally. And prospering from world trade, of course, is what will generate the real peace dividends.