[Announce] The true dollar cost of our military adventurism

[Robert Waldrop]

http://www.alternet.org/story/83555
The Pentagon Strangles Our Economy: Why the U.S. 
Has Gone Broke
By Chalmers Johnson, Le Monde diplomatique. Posted 
April 26, 2008.
60 years of enormous military spending is taking a 
dramatic toll on the rest of the economy.
The military adventurers in the Bush 
administration have much in common with the 
corporate 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 opportunity 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 important, 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 important 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 
pork-barrel projects in their districts, have a 
political interest in supporting 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 documents) 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 import 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 imported 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 accumulated 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.

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 Report 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 leadership, 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 Washington, 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 accumulated deterioration in many 
facets of life, by the inability to alleviate 
human wretchedness of long duration."

In an important 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 evaporated. Machine tools, an 
industry on which Melman was an authority, are a 
particularly important 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 imports 
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 relationship 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.