A New Peace Dividend?

One of the clear lessons political lessons (if there are any) of the “great recession” from which the country is slowly emerging is that the United States cannot afford everything, since unbridled spending in the absence of additional public revenues (taxes) means a burgeoning deficit that will be handed down to future generations. No one seems to find this prospect of kicking the fiscal can rhetorically acceptable, yet nobody seems to offer any serious plans for changing the ways and objects on which public money is spent.

Most of the proposals are laughably irresponsible and insincere. The Republicans want to lower taxes (at least they want to restore the Bush tax cuts for the very wealthy), on the empirically shaky ground that doing so will stimulate private investment, which will produce jobs, which will produce more income because the incomes from these jobs can be taxed. The underlying premise is John Kennedy’s multiplier effect, which any honest economist will tell you only works in very special circumstances, such as pent-up needs to buy and consume, which clearly is not the case today. Trickle-down economics is a fiscally responsible approach to deficit spending only for the extremely cynical or intellectually impaired. When asked where spending can be cut, Republicans rally behind John McCain and eliminating earmarks. Never mind that these account for about $10 billion annually or that a great deal of these are sponsored by fellow Republicans (my former senator, Richard Shelby of Alabama, is probably King Pork).

Democrats don’t do much better. They correctly identified health care as the future’s budget buster, but ladeled enough extraneous spending into the health care bill to dilute its salutary effects. Thet also correctly identify current budget trends as ruinous, yet they have little to say about what to do about them. Entitlements are the burgeoning villain, but who is seriously willing to propose building Al Gore’s “lock box”around the social security fund or moving back the eligibility time frame for seniors? Not anyone standing for reelection.

This space is normally devoted to foreign and security topics, so what is a discussion of the current economic woes doing here? The answer is that national security spending run amok has been and continues to be one of the prime drivers of the deficits that are accumulating. Politicians on both sides have ruled subjecting defense spending to scrutiny to help reduce deficits is off-limits. My point here is that defense spending cuts must be part of any serious effort to return to something like national solvency. It may not endear me to many colleagues to say this, but anyone who tells you different is either lying or delusional. Or both. To set the ship of state right, we simply must have a new peace dividend.

Three examples of uncritical defense spending (“spend whatever is necessary regardless of the consequences”) stand out. The most obvious are the wars in Iraq and Afghanistan. No one truly knows–of if they do, will not admit–what these adventures have cost us to date, but it is certainly at least $2 trillion (a VERY conservative estimate), and it is almost certainly costing in the range of$500 billion a year to continue these efforts. Regardless of what one thinks of the geopolitical merits of either adventure, can anyone argue that even the most extravagantly positive outcome will come close to justifying this level of expenditure? Withdraw from both places and see how much you save.

There are two other smaller but not insignificant examples. One is the global war on terror (GWOT). No one, to my knowledge, has systematically cost accounted how much U.S. treasure has gone into this effort, but it is a lot (close to a trillion?). Usama bin Laden must be laughing up his sleeve at how he is undermining the American economy on the cheap in this “war.” Would it not be feasible instead to try something else to defuse the threat, liking leaving Afghanistan and Iraq (thereby undermining the argument we are there as imperialists) and retreat from our blanket endorsement of Israel (particularly in their relations with the Palestinians)? I’m not sure how much this these acts would reduce the threat and thus our expenses, but I am sure it would have a measurable impact.

The third example is the All-Volunteer Force (AVF), America’s professional armed force. The AVF has been in existence now for nearly four decades, and it has virtues. The military likes it, because it produces a highly motivated force (everybody who is there wants to be), and the pay is better. The politicians like it, because it removes the possibility that any of their constituents might be forced into involuntary service (drafted) and sent into combat in places they would almost certainly not tolerate their own sons and daughters being sent (Iraq and Afghanistan).

The AVF is also pernicious. For one thing, it is very expensive, since it must compete economically for the services of its members, and it is small, since only a limited number of people will volunteer under any circumstances. This latter dynamic means it must be augmented by using very expensive civilian contractors or by using socially expensive reserves. Moreover, the AVF may be too easy to use, since those contemplating employing American forces do not have to ask themselves the question, “will the American public buy into the prospect of their children being sent off to fight and die in (fill in the blank)?”

The defense budget cannot take all the hits necessary to recreate fiscal responsibility, but looking at the three areas raised could at least contribute. There is, for instance, no question that a substantial tax increase is necessary to right the ship of state, but proposing that requires a level of political courage not abundantly evident today. A new peace dividend is not the panacea, but it is a beginning. Let’s put defense spending  back on the chopping block!


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