America's Military Keynesianism

[Vympel]

How to sink America

Going Bankrupt
Why the Debt Crisis Is Now the Greatest Threat to the American Republic
By Chalmers Johnson

The military adventurers of the Bush administration have 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 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 utter fiscal irresponsibility has been 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, in the current fiscal year (2008) 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," which I discuss in detail in my book Nemesis: The Last Days of the American Republic. 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 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 United States has become the largest single salesman of arms and munitions to other nations on Earth. Leaving out of account 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 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 30-40% 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 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 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 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 $93.4 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 Republic, 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% 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 current 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 product -- all goods and services produced domestically) was estimated to be slightly larger than that of the U.S. However, 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. For example, 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 $88 billion per year trade surplus with the United States and enjoys the world's second highest current account balance. (China is number one.) The United States, by contrast, is number 163 -- dead last on the list, worse than countries like Australia and the United Kingdom that also have large trade deficits. Its 2006 current account deficit was $811.5 billion; second worst was Spain at $106.4 billion. This is what 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 November 7, 2007, the U.S. Treasury announced that the national debt had breached $9 trillion for the first time ever. This was just five weeks after Congress raised the so-called 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 in comparison with the rest of the world.

The world's top 10 military spenders and the approximate amounts each country currently budgets for its military establishment are:

1. United States (FY08 budget), $623 billion
2. China (2004), $65 billion
3. Russia, $50 billion
4. France (2005), $45 billion
5. United Kingdom, $42.8 billion
6. Japan (2007), $41.75 billion
7. Germany (2003), $35.1 billion
8. Italy (2003), $28.2 billion
9. South Korea (2003), $21.1 billion
10. India (2005 est.), $19 billion

World total military expenditures (2004 est.), $1,100 billion
World total (minus the United States), $500 billion

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 entrenched in our democratic political system where they are starting to wreak havoc. This ideology I call "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 World War II. 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 April 14, 1950, and signed by President Harry S. Truman on September 30, 1950, it laid out the basic public economic policies that the United States 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, American 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 February 6, 1961: "The conjunction of an immense military establishment and a large arms industry is new in the American experience" -- that is, 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 American 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, in fact, a form of slow economic suicide.

On May 1, 2007, the Center for Economic and Policy Research of Washington, D.C., released a study prepared by the global 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. Needless to say, the U.S. economy has had to cope with growing defense spending for more than 60 years. He found that, after 10 years of higher defense spending, there would be 464,000 fewer jobs than in a baseline 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.

Hollowing Out the American Economy

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 American 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.

Nuclear weapons furnish a striking illustration of these anomalies. Between the 1940s and 1996, the United States 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 United States 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 American 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 American preoccupation with its armed forces and their weaponry since the onset of the Cold War. Melman wrote (pp. 2-3):

"From 1946 to 1969, the United States government spent over $1,000 billion 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. In other words, 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 twenty-first 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 (p. 186) "that 64 percent of the metalworking machine tools used in U.S. industry were ten 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 in the period 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 done can never be rectified. There are, however, some steps that this country 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 the national security of the United States, 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.

[Admiral Valdemar]

The US military is a system rigged to implode? Stop the presses! I thought F-22s, TUSKs and CVNs up the wazoo was fiscally responsible. Oh well.

Actually, having just watched Die Hard 4.0 again, I thought the scene talking about stealing the US' wealth was funny, given the US right now just prints money when it wants. Otherwise, not even Simon Gruber can steal your gold, for it likely isn't the American's for much longer.

[Stuart Mackey]

I have said it before on SDN, that if anything erodes the US as the premier power it will be the same base reasons as the old USSR: the US's eyes are bigger than its stomach.

[MKSheppard]

Awesome; an article which does the old tired old trope of "LOOK, US SPENDING BIGGER THAN NEXT TEN NATIONS COMBINED"; forgetting that we are simply that gi-normous.

[Stuart Mackey]

Awesome; an article which does the old tired old trope of "LOOK, US SPENDING BIGGER THAN NEXT TEN NATIONS COMBINED"; forgetting that we are simply that gi-normous.

Like to substantiate that?

[Admiral Valdemar]

It doesn't matter, because your economy can't substantiate such a large military machine, no matter how necessary or not it may be. At the end of the day, economics dictates what toys and how many you get to pay to use them.

[Adrian Laguna]

The US military is a system rigged to implode? Stop the presses! I thought F-22s, TUSKs and CVNs up the wazoo was fiscally responsible. Oh well.

F-22s and CVNs are quite justified, thank you very much. The TUSK maybe not so much, as MBTs really aren't meant for urban warfare in the first place.

A big part of the problem is not so much that the United States likes having a very high tech military, but rather that the current system is hilariously inefficient. If we went back to a WWII style materiel appropriations and manufacturing process, I think things would improve dramatically. Another big part of the problem is how the United States likes to go for utterly worthless pieces of shit, and when they don't work, because they're shit, they try to make them work by throwing money at the problem. Witness the Fucked-up Combat System, which incidentally is expected to cost about 5 times what the F-22 is costing, the Little Crappy Ship, and the V-22 Osprey.

Awesome; an article which does the old tired old trope of "LOOK, US SPENDING BIGGER THAN NEXT TEN NATIONS COMBINED"; forgetting that we are simply that gi-normous.

Actually, we spend bigger than everyone else combined.

[Admiral Valdemar]

F-22s and CVNs are quite justified, thank you very much. The TUSK maybe not so much, as MBTs really aren't meant for urban warfare in the first place.

Which is nice and all, but justification isn't money. You have reasons for having these toys. You don't have the cash. That's too bad.

[Beowulf]

Awesome; an article which does the old tired old trope of "LOOK, US SPENDING BIGGER THAN NEXT TEN NATIONS COMBINED"; forgetting that we are simply that gi-normous.

Like to substantiate that?

World GDP: $65.82 trillion (2007 est.)

US GDP: $13.86 trillion (2007 est.)

Largest national economy in the world.

[Adrian Laguna]

Which is nice and all, but justification isn't money. You have reasons for having these toys. You don't have the cash. That's too bad.

Like I said, a lot of the reason why there's a cash problem is that so much is simply wasted.

[Stuart Mackey]

Awesome; an article which does the old tired old trope of "LOOK, US SPENDING BIGGER THAN NEXT TEN NATIONS COMBINED"; forgetting that we are simply that gi-normous.

Like to substantiate that?

World GDP: $65.82 trillion (2007 est.)

US GDP: $13.86 trillion (2007 est.)

Largest national economy in the world.

And getting more broke by the day.

[Admiral Valdemar]

It's not just that you're buying top of the range IFVs when all you need is better body armour, it's a case of the whole nation having the financial sense of a modern Republican. The nation is bankrupt, whether the DoD spends a million bucks or a trillion. You can't support the defence you want if your whole industry is letting you down, and even though fat can be trimmed from the Pentagon's pork list, it's the general situation with respect to spending cash you don't have.

SNL did a great sketch years ago with Steve Martin on this. It's funny how it could save a lot of hassle today if seriously looked at.

[Fingolfin_Noldor]

Is there a new figure for the US debt vs the size of the economy?

[MKSheppard]

In regards to his wailing about the military budget:

Link

US Spending as percentage of GDP.

1944 - Height of WWII: 37.8%
1953 - Korean War: 14.2%
1956 - Strategic Air Command: 10%
1968 - Vietnam War: 9.4%
1986 - Height of Reagan Buildup: 6.2%
1996 - Clinton's 2nd Term Begins: 3.7%
2000 - End of Clinton's 2nd Term: 3%
2001 - Holy Shit, 9/11: 3%
2003 - Iraq War Begins: 3.7%
2006 - Iraq War Grinds On: 3.7%

In Comparison:

Soviet Union Military Spending (Typical Cold War Year) 20.00%
Saudi Arabia (2006) 10.00%
Israel (2006) 7.30%
China (2006) 4.30%

US military spending as a percentage of discretionary spending:

1962 72.9%
1986 62.4%
2000 48.0%
2003 49.0%

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

So? The military's never actually built or owned nuclear weapons in the United States. They've always been under civilian control, right from the 1940s to when DoE was created in 1977; it took over responsibility for making nukes and owning them.

Not to mention that in the early 1950s; SAC didn't even own or have a single nuke on it's bases. Yes; if we wanted to go nuke the Soviet Union; SAC would have to order it's bombers to take off and fly to Atomic Energy Commission facilities all over the US where they would be loaded up with nuclear weapons; the concept being that the military couldn't be trusted with the awesome power of the atom in peacetime. This of course was later rectified, by allowing SAC to store the nukes on their bases, but that came later.

This is whining about something which has been SOP for 31 years, and he's only just now noticing it? Imbecile.

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 Republic, Egypt, and Pakistan).

Ah good old FMA. Nothing new. We sold tons of shit, from M-47s and M-48s along with various aircraft models at absurdly low prices to re-equip european national forces in the 1950s. The flood of cheap M-47/48s is what basically killed French tank development until the Franco/German tank program which led to Leopard and AMX-30 in the 60s. This should be more correctly regarded as diplomatic bribe money; especially for most of who we send it to.

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.

What, you mean we have to offer our volunteer army something to get them to re-enlist other than "spend another exciting 12 months in Iraq, being shot at by everyone?

Thank you for another round of "stating the stunningly obvious".

Another $46.4 billion goes to the Department of Homeland Security.

I don't like DHS either; but why is it included in the military industrial complex?

Missing as well from this compilation is $1.9 billion to the Department of Justice for the paramilitary activities of the FBI

*black helicopters swoop in and take you away*

Besides, we gotta keep Mulder and Skully up to date on the latest science goodies; I think their travel costs are at least a couple hundred million now.

The rest of it is just stupidly grasping at straws to find anything which can be counted as "military".

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.

US Spending as percentage of GDP.

1944 - Height of WWII: 37.8%
1953 - Korean War: 14.2%
1956 - Strategic Air Command: 10%
1968 - Vietnam War: 9.4%
1986 - Height of Reagan Buildup: 6.2%
1996 - Clinton's 2nd Term Begins: 3.7%
2000 - End of Clinton's 2nd Term: 3%
2001 - Holy Shit, 9/11: 3%
2003 - Iraq War Begins: 3.7%
2006 - Iraq War Grinds On: 3.7%

In Comparison:

Soviet Union Military Spending (Typical Cold War Year) 20.00%
Saudi Arabia (2006) 10.00%
Israel (2006) 7.30%
China (2006) 4.30%

US military spending as a percentage of discretionary spending:

1962 72.9%
1986 62.4%
2000 48.0%
2003 49.0%

(snip more economic alarmism)

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 World War II. 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 April 14, 1950, and signed by President Harry S. Truman on September 30, 1950, it laid out the basic public economic policies that the United States 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, American 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.

What a fucking retard who doesn't even know history.

We didn't build up a huge munitions industry after WW2; We didn't have a large military; we pretty much did a giant firesale on everything remotely military; we pushed brand new fighter aircraft off the decks of aircraft carriers; etc.

If we had such a huge evil war mongering industry; then why the fuck did we have to literally go to World War II memorials during the first year of the Korean War to get M4 Shermans and M26 Pershings to refurbish for combat duty?

Even more insane; we actually formed a special unit which went to all the old Pacific War Battlefields and recovered all the old equipment we had left behind, and shipped them to Japan, where they were refurbished (and also caused the Japanese economy to recover from it's WWII crash) and then sent to Korea.

Korea was when we realized that we couldn't do what we had traditionally practiced; have a small military, and then in time of war build it up. The new kind of wars we would face would be fought with what you had then and there; not with what you could build given two years of production time. Hence the need to build up warstocks.

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 February 6, 1961: "The conjunction of an immense military establishment and a large arms industry is new in the American experience" -- that is, the military-industrial complex.

Nevermind that:

1.) Large aircraft for Strategic Air Command (B-52s and KC-135s) drive the civilian jet aviation industry

2.) Nuclear powered submarines are proving grounds for the techniques needed to build and man a large number of nuclear power plants in the united states.

3.) ICBMs provided many of our early space launchers and helped get the US rocket industry off the ground.

4.) Surveillance and Communications Sats; oh gee; look at how much they've improved our lives; because the military funds all the bleeding edge research and the results filter down to Ma Bell and other companies' commercial projects.

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.

I guess us committing a fucking slaughter of our aerospace and defense industry in the 1990s just never happened? Imbecile.

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 American 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.

All those jobs were being diverted into the Aerospace sector, led by such giants as Boeing, Lockheed, McDonnell, Douglas, North American, Convair, and others.

Nuclear weapons furnish a striking illustration of these anomalies. Between the 1940s and 1996, the United States 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 United States 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 American economy.

Ah, the old whine:

"But you can't hug children with nuclear arms!"

Nevermind that those weapons prevented World War III; which would have been more devastating than World War II; even with just conventional weapons.

The fact that we did not modernize or replace our capital assets is one of the main reasons why, by the turn of the twenty-first 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 (p. 186) "that 64 percent of the metalworking machine tools used in U.S. industry were ten 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."

Hm. 1968 minus ten equals 1958. Which is just about when we pretty much began the gutting of our aerospace industry and the assorted subsectors by cancelling the B-70; which needed brand new methods for everything.

beginning to liquidate our global empire of over 800 military bases

Imbecile.

Since 1988, BRAC I, II, III, and IV have closed 97 bases; and realigned 55 other major installations.

But hey, we can't let facts get in teh way of a good screed, now can we?

[Surlethe]

Is there a new figure for the US debt vs the size of the economy?

If public debt is $9 trillion and the economy is $13 trillion, public debt is still about 70% of GDP, which is as I understand quite manageable. I'm more interested personally in overweening private debt, which I've had difficulty finding figures on. The opportunity cost of the military is structural deficiencies in the country's economy, but the trigger of this decline will be a private debt burden the economy simply can't finance.

[Darth Wong]

Awesome; an article which does the old tired old trope of "LOOK, US SPENDING BIGGER THAN NEXT TEN NATIONS COMBINED"; forgetting that we are simply that gi-normous.

Like to substantiate that?

World GDP: $65.82 trillion (2007 est.)

US GDP: $13.86 trillion (2007 est.)

Largest national economy in the world.

So the US has a larger military budget than the rest of the world combined, and its economy is almost one quarter as large as the rest of the world combined. Do you not see the mathematical problem here?

[J]

Clearly, the rest of the world isn't spending enough on military goodies.

[Illuminatus Primus]

U.S. military spending and military adventurism should be lower, but really, its a symptom of American imperial hubris and misplaced attentions; its not actually the central problem. Really, deregulation, privatization, and the easy credit economy with an emphasis on ephemeral "service" industries is the problem. The U.S. military spending has actually paid off in a lot of private industry sectors; particularly because its one of the few excuses tolerated in the U.S. for state intervention in the economy. Namely, the U.S. government puts up huge sums and incentives for highly expensive, unlikely to yield short-term returns research. After the uneconomical and long-term R&D has been tackled, private enterprise brings it to the market. The Internet, materials science, electronics, communications, space industry, microwaves... Quite frankly I do not want to go as far as they had; one reason I am partial to the TBO force structure is not only is it actually cheaper and involves fewer foreign adventures, but its social benefit yield is very high due to strongarming into space.

[Fingolfin_Noldor]

Clearly, the rest of the world isn't spending enough on military goodies.

Well, the Europeans are off practising Socialism (*grasp*) so they don't have money to spend on toys.

[Fingolfin_Noldor]

U.S. military spending and military adventurism should be lower, but really, its a symptom of American imperial hubris and misplaced attentions; its not actually the central problem. Really, deregulation, privatization, and the easy credit economy with an emphasis on ephemeral "service" industries is the problem. The U.S. military spending has actually paid off in a lot of private industry sectors; particularly because its one of the few excuses tolerated in the U.S. for state intervention in the economy. Namely, the U.S. government puts up huge sums and incentives for highly expensive, unlikely to yield short-term returns research. After the uneconomical and long-term R&D has been tackled, private enterprise brings it to the market. The Internet, materials science, electronics, communications, space industry, microwaves... Quite frankly I do not want to go as far as they had; one reason I am partial to the TBO force structure is not only is it actually cheaper and involves fewer foreign adventures, but its social benefit yield is very high due to strongarming into space.

DARPA does finance some good research work. Got to hand it to them actually. The DARPA-organised unmanned races actually drove the researchers to work harder.

[Darth Wong]

Isn't that a bit like saying that you drove across town in order to warm up your car? It seems like a rather indirect route:

1. Tax
2. Spend on enormous military R&D, procurement, maintenance, and employee budget
3. Some portion of military R&D might be applicable to civilian consumer goods
4. Congratulate oneself for improving consumer goods

Why not simply subsidize consumer research spending more?

[J]

Really, deregulation, privatization, and the easy credit economy with an emphasis on ephemeral "service" industries is the problem.

It would be interesting to know how much of America's GDP comes from manufacturing goods, extracting resources from the Earth, and building infrastructure as opposed to pulling money out of thin air with questionable investment & banking schemes.

[Darth Wong]

Really, deregulation, privatization, and the easy credit economy with an emphasis on ephemeral "service" industries is the problem.

It would be interesting to know how much of America's GDP comes from manufacturing goods, extracting resources from the Earth, and building infrastructure as opposed to pulling money out of thin air with questionable investment & banking schemes.

Some have argued that the biggest problem is simply the longstanding policy of encouraging investment in vehicles other than guaranteed and interest-bearing securities. When you have so many people, including much of the middle-class, pouring their money into investments, you have the bizarre problem of investment firms and banks having too much investment money.

Of course, when they have so much investment money, this means that the demand for investment vehicles goes up. And if the demand goes up, the price goes up. So, just as the value of a cramped apartment can skyrocket if real-estate demand is high enough, the value of crappy subprime mortgage-backed securities can shoot up in a high-demand investment market.

The result? The equivalent of an unscrupulous retailer who runs out of stock: he becomes desperate for anything to stock his shelves with. So investment firms manufactured investment vehicles out of thin air, by giving out loans to anyone who could sign his name on a piece of paper, and then turning around and selling them to anyone who had money to invest.

It's pretty sad how much money there is to be made by people who contribute absolutely nothing to society. And unlike Paris Hilton, they do not garner nigh-universal contempt for it. They get rich, walk away from the fiascoes they cause, and then use their money to aid the election campaigns of politicians who will help them do more of the same in future.

[Elfdart]

Isn't that a bit like saying that you drove across town in order to warm up your car? It seems like a rather indirect route:

1. Tax
2. Spend on enormous military R&D, procurement, maintenance, and employee budget
3. Some portion of military R&D might be applicable to civilian consumer goods
4. Congratulate oneself for improving consumer goods

Why not simply subsidize consumer research spending more?

Because building better cars and TVs doesn't make it easier to kill multitudes of brown people, the main result of war-wanking socialism.

[MKSheppard]

Because killing brown people more efficiently and lethally requires fundamental research in all sorts of disciplines as well as applied research.

Case in point; SDI really funded a lot of good advances in fundamental research in the 80s.