Friday, August 6, 2010

Idea # 1 for Solving the Economic Crisis: Kill the Military-Industrial Complex

To politicians and pundits of a conservative bent, the only way to avoid the coming Apocalyptic Fiscal Meltdown is to slash entitlement spending, i.e., those two big piggy banks--Medicare and Social Security. Because no politician in their right mind would touch the most popular federal programs in American history without political cover, the plan is to convince the American public that maintaining these programs "as is" will turn us into a third world country, i.e., Greece. With the public more-or-less acquiescent, they aim to get Obama and the Democrats on board with these "reforms," giving them plausible deniability come election time.

The problem is that these arguments, repeated ad nauseum in the MSM, are entirely fraudulent. It is true that both programs will soon be running annual deficits due to demographic fluctuations in a pay-as-you-go system (and for Medicare, the exploding costs of health care). Over the next two decades, millions of baby-boomers will hit retirement age, which means that the ratio of contributors to beneficiaries will be significantly reduced, at which point we begin to liquidate the trust fund assets to cover the deficits. The trust fund for Medicare is solvent until 2029 and for Social Security until 2040. According to the 2010 trustees report, a few fixes in payroll taxes and benefits will resolve the subsequent funding gaps in both programs. The larger point is that the Social Security and Medicare--funded by dedicated payroll taxes and individual premiums and co-payments--are entitlement programs that we pay into. By contrast, defense--funded out of general tax revenue--is part of the discretionary budget, making it a prime candidate for the chopping block.

A half-century ago, in his farewell address to the nation, General and President Dwight D. Eisenhower warned of an emerging military-industrial complex where business, military and congress worked hand-in-glove to enrich defense contractors, creating a standing army of unprecedented proportions and robbing the country of vital funding for hospitals, schools, and infrastructure. Today, Eisenhower's predictions have been borne out in spades, with defense contractors based in all fifty states where they blackmail politicians into maintaining the bloated and unnecessary military budget. Florida Congressman Alan Grayson (D) recently reenacted the Eisenhower speech, warning that our military spending was impoverishing the nation and robbing future generations.

How big is the U.S. defense budget? Bigger than those of the next fourteen states combined. The following chart from shows the disproportionate size of the U.S. military budget in 2009. U.S. military spending was almost equal to the defense spending of the rest of the world combined; the U.S. and our NATO Allies account for two-thirds of the world's total military spending.

How big is our military spending relative to other outlays? The following chart shows that defense was the largest item in the 2009 federal budget. An estimated 38 to 44 of federal taxes in 2010 will have gone to defense spending, according to the CBO.

It is worth noting that this actually underestimates the size of military spending relative to other budgetary outlays. Since Social Security and Medicare are basically self-funded entitlement programs, they are not included in the annual discretionary budget. Of the 2010 federal discretionary budget, military spending actually makes up over half:

Remarkably, military spending increased at a rate of about 9 percent annually from 2000 to 2009, according to the CBO. The proposed 2011 defense budget is between 1 and 1.2 trillion dollars.

Perhaps surprisingly (or not), most of this spending serves no obvious security purpose and may even make us less secure. We are often fed the line that our military is large because we a large country or that we are the global policeman, and so we must provide security for our Allies around the world and defend against our enemies. However, much of this spending goes to programs that cannot possibly enhance our or our Allies' security. Obama has managed to cancel some wasteful and unnecessary weapons programs, such as the F-22 fighter jet. However, many more remain intact. According to the Arms Control Association, the proposed 2011 defense budget includes a 10 percent increase in funding for our nuclear weapons program (we spend 27 billion USD a year expanding our capacity to build new nukes and maintaining old ones). Another 10 billion is for ballistic missile defense (despite the fact that missile defense does not appear to work); 5.4 billion to build Cold War era Virginia-class submarines (designed to fight Soviet subs); 2.8 billion for V-22 Osprey helicopters (plagued with operational failures); 1.5 for space-based missile defense (really?); and 11.4 billion for F-35 joint strike fighters (produced before designs were complete).

The requested base budget for the Pentagon in 2011 is 549 billion USD, not including the 159 billion to fight the wars in Iraq and Afghanistan, which will continue to be funded through supplemental budget requests. It is estimated that each additional soldier sent to Afghanistan is costing taxpayers one million USD a year. To date, the two wars together have cost a little over one trillion USD and counting. Besides funding wars and weapons systems with questionable purposes, pork and waste is endemic in the Pentagon; a 2003 report by the Defense Department Inspector General indicated that the Pentagon could not account for a gob-smacking one trillion dollars. I rest my case.

It might be argued that, despite the massive pork and waste in defense spending, these programs provide valuable jobs that would be lost in the event of drastic cuts to defense. To which I would say: that is a pretty damn expensive jobs-program. Moreover, if the government wanted to be in the business of job creation, then why not pay people to build hospitals, schools and highways (America's dams, bridges, and highways are in imminent need of repair according to the American Society of Civil Engineers)? What about employing engineers and scientists to develop new (renewable, clean) sources of energy and rebuild the nation's power grid? Wouldn't that be a better use of human capital than developing new and inventive ways of killing people?

So why aren't we trimming fat from the Pentagon pig? Cutting military spending is something that unites members of congress on both sides of the aisle (from progressive Alan Grayson to conservative Tom Coburn), think tanks from the Heritage Foundation and CATO to Brookings and the Center for American Progress; and defense secretaries from Donald Rumsfeld to Bob Gates. One of the reasons there haven't been draconian cuts is that defense contractors have Congress over a barrel. Thus, a contractor will typically farm out parts of its weapons program to states and districts of influential congresspeople. If a representative threatens to cut the program, the contractor threatens to publicize the number of jobs that will be lost in that representative's district should the program be cut. Due to the revolving door, lobbyists for the industry are also well-represented in the ranks of the Pentagon's top brass; at the same time, retired generals are well-represented among defense lobbyists. Taken together, the system keep the funding spigot open.

Despite overwhelming odds against meaningful reform, U.S. citizens need to push their leaders to do the right thing. In fact, we can't afford not to. No less a figure than our first president, George Washington, affirmed that "over grown military establishments are under any form of government inauspicious to liberty, and are to be regarded as particularly hostile to republican liberty


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  2. Thinking the same things, I googled for "Kill the Military Industrial Complex" and found your blog. Thanks for putting this out there.