BANKRUPTED BY WARS ON BEHALF OF THE NEOCONS AND ISRAEL? =91The Pentagon
Strangles Our Economy - Why the U.S. Has Gone Broke=92
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The Pentagon Strangles Our Economy:
Why the U.S. Has Gone Broke
By Chalmers Johnson
Le Monde Diplomatique,
via Information Clearing House,
26 April, 2008.
The military adventurers in the Bush administration have much in
common with the cor****ate leaders of the defunct energy company Enron.
Both groups thought that they were the "smartest guys in the room" --
the title of Alex Gibney's prize-winning film on what went wrong at
Enron. The neoconservatives in the White House and the Pentagon
outsmarted themselves. They failed even to address the problem of how
to finance their schemes of imperialist wars and global domination.
As a result, going into 2008, the United States finds itself in the
anomalous position of being unable to pay for its own elevated living
standards or its wasteful, overly large military establishment. Its
government no longer even attempts to reduce the ruinous expenses of
maintaining huge standing armies, replacing the equipment that seven
years of wars have destroyed or worn out, or preparing for a war in
outer space against unknown adversaries. Instead, the Bush
administration puts off these costs for future generations to pay or
repudiate. This fiscal irresponsibility has been disguised through
many manipulative financial schemes (causing poorer countries to lend
us unprecedented sums of money), but the time of reckoning is fast
approaching.
There are three broad aspects to the U.S. debt crisis. First, in the
current fiscal year (2008) we are spending insane amounts of money on
"defense" projects that bear no relation to the national security of
the U.S. We are also keeping the income tax burdens on the richest
segment of the population at strikingly low levels.
Second, we continue to believe that we can compensate for the
accelerating erosion of our base and our loss of jobs to foreign
countries through massive military expenditures -- "military
Keynesianism" (which I discuss in detail in my book Nemesis: The Last
Days of the American Republic). By that, I mean the mistaken belief
that public policies focused on frequent wars, huge expenditures on
weapons and munitions, and large standing armies can indefinitely
sustain a wealthy capitalist economy. The opposite is actually true.
Third, in our devotion to militarism (despite our limited resources),
we are failing to invest in our social infrastructure and other
requirements for the long-term health of the U.S. These are what
economists call op****tunity costs, things not done because we spent
our money on something else. Our public education system has
deteriorated alarmingly. We have failed to provide health care to all
our citizens and neglected our responsibilities as the world's number
one polluter. Most im****tant, we have lost our competitiveness as a
manufacturer for civilian needs, an infinitely more efficient use of
scarce resources than arms manufacturing.
Fiscal disaster
It is virtually impossible to overstate the profligacy of what our
government spends on the military. The Department of Defense's planned
expenditures for the fiscal year 2008 are larger than all other
nations' military budgets combined. The supplementary budget to pay
for the current wars in Iraq and Afghanistan, not part of the official
defense budget, is itself larger than the combined military budgets of
Russia and China. Defense-related spending for fiscal 2008 will exceed
$1 trillion for the first time in history. The U.S. has become the
largest single seller of arms and munitions to other nations on Earth.
Leaving out President Bush's two on-going wars, defense spending has
doubled since the mid-1990s. The defense budget for fiscal 2008 is the
largest since the second world war.
Before we try to break down and analyze this gargantuan sum, there is
one im****tant caveat. Figures on defense spending are notoriously
unreliable. The numbers released by the Congressional Reference
Service and the Congressional Budget Office do not agree with each
other. Robert Higgs, senior fellow for political economy at the
Independent Institute, says: "A well-founded rule of thumb is to take
the Pentagon's (always well publicized) basic budget total and double
it." Even a cursory reading of newspaper articles about the Department
of Defense will turn up major differences in statistics about its
expenses. Some 30-40% of the defense budget is 'black,'" meaning that
these sections contain hidden expenditures for classified projects.
There is no possible way to know what they include or whether their
total amounts are accurate.
There are many reasons for this budgetary sleight-of-hand -- including
a desire for secrecy on the part of the president, the secretary of
defense, and the military-industrial complex -- but the chief one is
that members of Congress, who profit enormously from defense jobs and
****k-barrel projects in their districts, have a political interest in
sup****ting the Department of Defense. In 1996, in an attempt to bring
accounting standards within the executive branch closer to those of
the civilian economy, Congress passed the Federal Financial Management
Improvement Act. It required all federal agencies to hire outside
auditors to review their books and release the results to the public.
Neither the Department of Defense, nor the Department of Homeland
Security, has ever complied. Congress has complained, but not
penalized either department for ignoring the law. All numbers released
by the Pentagon should be regarded as suspect.
In discussing the fiscal 2008 defense budget, as released on 7
February 2007, I have been guided by two experienced and reliable
analysts: William D Hartung of the New America Foundation's Arms and
Security Initiative and Fred Kaplan, defense correspondent for
Slate.org. They agree that the Department of Defense requested
$481.4bn for salaries, operations (except in Iraq and Afghanistan),
and equipment. They also agree on a figure of $141.7bn for the
"supplemental" budget to fight the global war on terrorism -- that is,
the two on-going wars that the general public may think are actually
covered by the basic Pentagon budget. The Department of Defense also
asked for an extra $93.4bn to pay for hitherto unmentioned war costs
in the remainder of 2007 and, most creatively, an additional
"allowance" (a new term in defense budget do***ents) of $50bn to be
charged to fiscal year 2009. This makes a total spending request by
the Department of Defense of $766.5bn.
But there is much more. In an attempt to disguise the true size of the
U.S. military empire, the government has long hidden major military-
related expenditures in departments other than Defense. For example,
$23.4bn for the Department of Energy goes towards developing and
maintaining nuclear warheads; and $25.3bn in the Department of State
budget is spent on foreign military assistance (primarily for Israel,
Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, the United Arab Republic,
Egypt and Pakistan). Another $1.03bn outside the official Department
of Defense budget is now needed for recruitment and re-enlistment
incentives for the overstretched U.S. military, up from a mere $174m
in 2003, when the war in Iraq began. The Department of Veterans
Affairs currently gets at least $75.7bn, 50% of it for the long-term
care of the most seriously injured among the 28,870 soldiers so far
wounded in Iraq and 1,708 in Afghanistan. The amount is universally
derided as inadequate. Another $46.4bn goes to the Department of
Homeland Security.
Missing from this compilation is $1.9bn to the Department of Justice
for the paramilitary activities of the FBI; $38.5bn to the Department
of the Treasury for the Military Retirement Fund; $7.6bn for the
military-related activities of the National Aeronautics and Space
Administration; and well over $200bn in interest for past debt-
financed defense outlays. This brings U.S. spending for its military
establishment during the current fiscal year, conservatively
calculated, to at least $1.1 trillion.
Military Keynesianism
Such expenditures are not only morally obscene, they are fiscally
unsustainable. Many neo-conservatives and poorly informed patriotic
Americans believe that, even though our defense budget is huge, we can
afford it because we are the richest country on Earth. That statement
is no longer true. The world's richest political entity, according to
the CIA's World Factbook, is the European Union. The E.U.'s 2006 GDP
was estimated to be slightly larger than that of the U.S. Moreover,
China's 2006 GDP was only slightly smaller than that of the U.S., and
Japan was the world's fourth richest nation.
A more telling comparison that reveals just how much worse we're doing
can be found among the current accounts of various nations. The
current account measures the net trade surplus or deficit of a country
plus cross-border payments of interest, royalties, dividends, capital
gains, foreign aid, and other income. In order for Japan to
manufacture anything, it must im****t all required raw materials. Even
after this incredible expense is met, it still has an $88bn per year
trade surplus with the U.S. and enjoys the world's second highest
current account balance (China is number one). The U.S. is number 163
-- last on the list, worse than countries such as Australia and the
U.K. that also have large trade deficits. Its 2006 current account
deficit was $811.5bn; second worst was Spain at $106.4bn. This is
unsustainable.
It's not just that our tastes for foreign goods, including im****ted
oil, vastly exceed our ability to pay for them. We are financing them
through massive borrowing. On 7 November 2007, the U.S. Treasury
announced that the national debt had breached $9 trillion for the
first time. This was just five weeks after Congress raised the "debt
ceiling" to $9.815 trillion. If you begin in 1789, at the moment the
constitution became the supreme law of the land, the debt ac***ulated
by the federal government did not top $1 trillion until 1981. When
George Bush became president in January 2001, it stood at
approximately $5.7 trillion. Since then, it has increased by 45%. This
huge debt can be largely explained by our defense expenditures.
The top spenders
The world's top 10 military spenders and the approximate amounts each
currently budgets for its military establishment are
Our excessive military expenditures did not occur over just a few
short years or simply because of the Bush administration's policies.
They have been going on for a very long time in accordance with a
superficially plausible ideology, and have now become so entrenched in
our democratic political system that they are starting to wreak havoc.
This is military Keynesianism -- the determination to maintain a
permanent war economy and to treat military output as an ordinary
economic product, even though it makes no contribution to either
production or consumption.
This ideology goes back to the first years of the cold war. During the
late 1940s, the U.S. was haunted by economic anxieties. The great
depression of the 1930s had been overcome only by the war production
boom of the second world war. With peace and demobilization, there was
a pervasive fear that the depression would return. During 1949,
alarmed by the Soviet Union's detonation of an atomic bomb, the
looming Communist victory in the Chinese civil war, a domestic
recession, and the lowering of the Iron Curtain around the USSR's
European satellites, the U.S. sought to draft basic strategy for the
emerging cold war. The result was the militaristic National Security
Council Re****t 68 (NSC-68) drafted under the supervision of Paul
Nitze, then head of the Policy Planning Staff in the State Department.
Dated 14 April 1950 and signed by President Harry S. Truman on 30
September 1950, it laid out the basic public economic policies that
the U.S. pursues to the present day.
In its conclusions, NSC-68 asserted: "One of the most significant
lessons of our World War II experience was that the American economy,
when it operates at a level approaching full efficiency, can provide
enormous resources for purposes other than civilian consumption while
simultaneously providing a high standard of living."
With this understanding, U.S. strategists began to build up a massive
munitions industry, both to counter the military might of the Soviet
Union (which they consistently overstated) and also to maintain full
employment, as well as ward off a possible return of the depression.
The result was that, under Pentagon leader****p, entire new industries
were created to manufacture large aircraft, nuclear-powered
submarines, nuclear warheads, intercontinental ballistic missiles, and
surveillance and communications satellites. This led to what President
Eisenhower warned against in his farewell address of 6 February 1961:
"The conjunction of an immense military establishment and a large arms
industry is new in the American experience" -- the military-industrial
complex.
By 1990 the value of the weapons, equipment and factories devoted to
the Department of Defense was 83% of the value of all plants and
equipment in U.S. manufacturing. From 1947 to 1990, the combined U.S.
military budgets amounted to $8.7 trillion. Even though the Soviet
Union no longer exists, U.S. reliance on military Keynesianism has, if
anything, ratcheted up, thanks to the massive vested interests that
have become entrenched around the military establishment. Over time, a
commitment to both guns and butter has proven an unstable
configuration. Military industries crowd out the civilian economy and
lead to severe economic weaknesses. Devotion to military Keynesianism
is a form of slow economic suicide.
Higher spending, fewer jobs
On 1 May 2007, the Center for Economic and Policy Research of
Wa****ngton, DC, released a study prepared by the economic and
political forecasting company Global Insight on the long-term economic
impact of increased military spending. Guided by economist Dean Baker,
this research showed that, after an initial demand stimulus, by about
the sixth year the effect of increased military spending turns
negative. The U.S. economy has had to cope with growing defense
spending for more than 60 years. Baker found that, after 10 years of
higher defense spending, there would be 464,000 fewer jobs than in a
scenario that involved lower defense spending.
Baker concluded: "It is often believed that wars and military spending
increases are good for the economy. In fact, most economic models show
that military spending diverts resources from productive uses, such as
consumption and investment, and ultimately slows economic growth and
reduces employment."
These are only some of the many deleterious effects of military
Keynesianism.
It was believed that the U.S. could afford both a massive military
establishment and a high standard of living, and that it needed both
to maintain full employment. But it did not work out that way. By the
1960s it was becoming apparent that turning over the nation's largest
manufacturing enterprises to the Department of Defense and producing
goods without any investment or consumption value was starting to
crowd out civilian economic activities. The historian Thomas E Woods
Jr. observes that, during the 1950s and 1960s, between one-third and
two-thirds of all U.S. research talent was siphoned off into the
military sector. It is, of course, impossible to know what innovations
never appeared as a result of this diversion of resources and
brainpower into the service of the military, but it was during the
1960s that we first began to notice Japan was outpacing us in the
design and quality of a range of consumer goods, including household
electronics and automobiles.
Can we reverse the trend?
Nuclear weapons furnish a striking illustration of these anomalies.
Between the 1940s and 1996, the U.S. spent at least $5.8 trillion on
the development, testing and construction of nuclear bombs. By 1967,
the peak year of its nuclear stockpile, the U.S. possessed some 32,500
deliverable atomic and hydrogen bombs, none of which, thankfully, was
ever used. They perfectly illustrate the Keynesian principle that the
government can provide make-work jobs to keep people employed. Nuclear
weapons were not just America's secret weapon, but also its secret
economic weapon. As of 2006, we still had 9,960 of them. There is
today no sane use for them, while the trillions spent on them could
have been used to solve the problems of social security and health
care, quality education and access to higher education for all, not to
speak of the retention of highly-skilled jobs within the economy.
The pioneer in analyzing what has been lost as a result of military
Keynesianism was the late Seymour Melman (1917-2004), a professor of
industrial engineering and operations research at Columbia University.
His 1970 book, Pentagon Capitalism: The Political Economy of War, was
a prescient analysis of the unintended consequences of the U.S.
preoccupation with its armed forces and their weaponry since the onset
of the cold war. Melman wrote: "From 1946 to 1969, the United States
government spent over $1,000bn on the military, more than half of this
under the Kennedy and Johnson administrations -- the period during
which the [Pentagon-dominated] state management was established as a
formal institution. This sum of staggering size (try to visualize a
billion of something) does not express the cost of the military
establishment to the nation as a whole. The true cost is measured by
what has been foregone, by the ac***ulated deterioration in many
facets of life, by the inability to alleviate human wretchedness of
long duration."
In an im****tant exegesis on Melman's relevance to the current American
economic situation, Thomas Woods writes: "According to the U.S.
Department of Defense, during the four decades from 1947 through 1987
it used (in 1982 dollars) $7.62 trillion in capital resources. In
1985, the Department of Commerce estimated the value of the nation's
plant and equipment, and infrastructure, at just over $7.29
trillion ... The amount spent over that period could have doubled the
American capital stock or modernized and replaced its existing stock."
The fact that we did not modernize or replace our capital assets is
one of the main reasons why, by the turn of the 21st century, our
manufacturing base had all but eva****ated. Machine tools, an industry
on which Melman was an authority, are a particularly im****tant
symptom. In November 1968, a five-year inventory disclosed "that 64%
of the metalworking machine tools used in U.S. industry were 10 years
old or older. The age of this industrial equipment (drills, lathes,
etc.) marks the United States' machine tool stock as the oldest among
all major industrial nations, and it marks the continuation of a
deterioration process that began with the end of the second world war.
This deterioration at the base of the industrial system certifies to
the continuous debilitating and depleting effect that the military use
of capital and research and development talent has had on American
industry."
Nothing has been done since 1968 to reverse these trends and it shows
today in our massive im****ts of equipment -- from medical machines
like proton accelerators for radiological therapy (made primarily in
Belgium, Germany, and Japan) to cars and trucks.
Our short tenure as the world's lone superpower has come to an end. As
Harvard economics professor Benjamin Friedman has written: "Again and
again it has always been the world's leading lending country that has
been the premier country in terms of political influence, diplomatic
influence and cultural influence. It's no accident that we took over
the role from the British at the same time that we took over the job
of being the world's leading lending country. Today we are no longer
the world's leading lending country. In fact we are now the world's
biggest debtor country, and we are continuing to wield influence on
the basis of military prowess alone."
Some of the damage can never be rectified. There are, however, some
steps that the U.S. urgently needs to take. These include reversing
Bush's 2001 and 2003 tax cuts for the wealthy, beginning to liquidate
our global empire of over 800 military bases, cutting from the defense
budget all projects that bear no relation****p to national security and
ceasing to use the defense budget as a Keynesian jobs program.
If we do these things we have a chance of squeaking by. If we don't,
we face probable national insolvency and a long depression.
=A9 2008 Le Monde diplomatique All rights reserved
(This news item is posted under =91Fair Use=92
provisions)
- o O o =96
UNITED STATES GETS READY TO FIGHT ISRAEL'S NEXT WAR: 'Joint Chiefs
Chairman Says U.S. Preparing Military Options Against Iran'
http://www.wa****ngtonpost.com/wp-dyn/content/article/2008/04/25/AR2008042501=
480_pf.html
See Also:
'Was April 20th The Original Date Of The Planned U.S. 'Air Strike' On
Iran?' http://www.mimico-by-the-lake.com/IRANPLAN.HTM
'Is A U.S./Israeli Air Strike On Iran Drawing Steadily Closer?' (News
Updates) http://www.mimico-by-the-lake.com/IRANWAR.HTM
- o O o =96
See also:
'Global Starvation - Coming Soon To Europe And North America, Too?'
http://www.mimico-by-the-lake.com/FOODLOSS.HTM
'The Coming Great Food Shortages In America' by Texe Marrs
http://www.mimico-by-the-lake.com/TEXMARRS.HTM
'Sorting Through The Rubble In Post-Bubble America'
http://www.mimico-by-the-lake.com/MELTDWN1.HTM
The Coming U.S. Economic and Financial Meltdown'
http://www.mimico-by-the-lake.com/MELTDOWN.HTM
'The U.S. Economic and Financial Meltdown Accelerates'
http://www.mimico-by-the-lake.com/MELTDWN2.HTM
'No End In Sight As U.S. Financial Crisis Deepens'
http://www.mimico-by-the-lake.com/MELTDWN3.HTM
- o O o -
Did Tsar Nicholas II Of Russia And The Romanov Royal Family Die In The
Ipatiev House in Ekaterinburg - Or Did Britain And The U.S. Cooperate
In Their Secret Rescue...?
History says 'NO', but some surprising voices say 'YES!'
Read online or download for free the 1920's book, 'Rescuing The Czar:
Two Authentic Diaries', together with some equally surprising news
re****ts, at http://www.mimico-by-the-lake.com/histrus3.htm
You'll find a wide range of other free online classic history and
travel books (on English history, American History, Canadian History,
European History, Napoleonic History, Russian History, German History,
Greek and Roman History), plus the books of Jane Austen, at
http://www.mimico-by-the-lake.com/freehist.htm
(Some of these books will be uploaded over the next few days, so if
you click on a book title on that page which doesn't presently work,
please try it again in a day or so.)
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