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GOING BANKRUPT
January 22, 2008
The military adventurers of the Bush administration had much in common with the corporate leaders of the defunct energy company Enron. Both groups of men thought that they were “the smartest guys in the room,” the title of Alex Gibney’s prizewinning 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 found 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 attempted to reduce the ruinous expenses of maintaining huge standing armies, replacing the equipment that seven years of wars had destroyed or worn out, or preparing for a war in outer space against unknown adversaries. Instead, the Bush administration put off these costs for future generations to pay—or repudiate. This utter fiscal irresponsibility was disguised through many manipulative financial schemes (such as causing poorer countries to lend us unprecedented sums of money), but the time of reckoning is fast approaching.
There are three broad aspects to our debt crisis. First, we are spending insane amounts of money on “defense” projects that bear no relationship to the national security of the United States. Simultaneously, we are keeping the income tax burdens on the richest segments of the American population at strikingly low levels.
Second, we continue to believe that we can compensate for the accelerating erosion of our manufacturing base and our loss of jobs to foreign countries through massive military expenditures—so-called military Keynesianism. By “military Keynesianism,” 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 our country. 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. Let me discuss each of these.
THE CURRENT 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 fiscal year 2008 were larger than all other nations’ military budgets combined. The supplementary budget to pay for the wars in Iraq and Afghanistan, not part of the official defense budget, was itself larger than the combined military budgets of Russia and China. Defense-related spending for fiscal 2008 exceeded $1 trillion for the first time in history. The United States has become the largest single salesman of arms and munitions to other nations. Leaving out of account the two ongoing wars, defense spending has doubled since the mid-1990s. The defense budget for fiscal 2008 was the largest since World War II.
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 to 40 percent 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 somewhat 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 has not penalized either department for ignoring the law. The result is that all numbers released by the Pentagon should be regarded as suspect.
In discussing the fiscal 2008 defense budget, as released to the press on February 7, 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 $481.4 billion for salaries, operations (except in Iraq and Afghanistan), and equipment. They also agree on a figure of $141.7 billion for the “supplemental” budget to fight the “global war on terrorism”—that is, the two ongoing wars that the general public may think are actually covered by the basic Pentagon budget. The Department of Defense also asked for an extra $93.4 billion 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 $50 billion to be charged to fiscal year 2009. This comes to a total spending request by the Department of Defense of $766.5 billion.
But there is much more. In an attempt to disguise the true size of the American military empire, the government has long hidden major military-related expenditures in departments other than Defense. For example, $23.4 billion for the Department of Energy goes toward developing and maintaining nuclear warheads, and $25.3 billion in the Department of State budget is spent on foreign military assistance (primarily for Israel, Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, the United Arab Emirates, Egypt, and Pakistan). Another $1.03 billion outside the official Department of Defense budget is now needed for recruitment and reenlistment incentives for the overstretched U.S. military itself, up from a mere $174 million in 2003, the year the war in Iraq began. The Department of Veterans Affairs currently gets at least $75.7 billion, 50 percent of which goes for the long-term care of the grievously injured among the at least 28,870 soldiers so far wounded in Iraq and another 1,708 in Afghanistan. The amount is universally derided as inadequate. Another $46.4 billion goes to the Department of Homeland Security.
Missing as well from this compilation is $1.9 billion to the Department of Justice for the paramilitary activities of the FBI; $38.5 billion to the Department of the Treasury for the Military Retirement Fund; $7.6 billion for the military-related activities of the National Aeronautics and Space Administration; and well over $200 billion in interest for past debt-financed defense outlays. This brings U.S. spending for its military establishment during the fiscal year 2008, conservatively calculated, to at least $1.1 trillion.
MILITARY KEYNESIANISM
Such expenditures are not only morally obscene, they are fiscally unsustainable. Many neoconservatives 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. Unfortunately, that statement is no longer true. The world’s richest political entity, according to the CIA’s “World Factbook,” is the European Union. The EU’s 2006 GDP (gross domestic
