How Are We Going to Pay for This?

ON SELECTIVE FISCAL HAWKISHNESS

What if I told you that there was a federal program out there that cost the American taxpayers billions of dollars, much of which is unaccounted and streaming into the pockets of private companies? What if I told you that corruption and graft were so rife in this program that independent auditors couldn’t even complete their auditing process for lack of accountability? Furthermore, this program has failed, by any metric, to accomplish most of its stated goals for generations. In fact, anywhere this program has been applied has become markedly worse off for it.

If I were to tell you that such a program exists, certainly you would think that your responsible, fiscal conservatives in the Republican Party are hard at work to dismantle this entitlement boondoggle.

Who is it? Ghetto mom using her EBT Card to buy real meat? Medicaid recipient getting anti-biotics they don’t deserve? Someone with a cell phone collecting welfare? Yank these ne’erdowells from the government teat and make them get jobs. Cut it. Cut it! CUT IT!!

Well, actually, no. We’re talking about military spending.

Oh…well…um…see that’s…well…

…I know. We’ll form a committee! (awkward silence)

Yeah. That’s the response. I’ll guarantee it.

Mention the Green New Deal. Mention Medicare for All. Mention publicly funded higher education. GMI. Job guarantees. Paid family leave. Infrastructure. Anything. Anything at all that could conceivably benefit everyday Americans, and you will hear from the responsible adults in the room some variation of, “sure, that’s sounds great. But how’re you gonna pay for it? We just can’t afford something that extravagant.”

Point out the fact that every single advanced nation and some not-so-advanced nations manage to provide most, if not all, of these benefits to their citizens in some form. “Sorry. There’s just no money for it here in the good ol’ U.S. of A.”

Mention raising military spending and the same responsible adults say…

Nothing. Not a peep.

If you hear anything at all it will be a raucous cheer.

This has nothing to do with the deficit. It has to do with priorities. There really is plenty of money out there with which to do the things we want. The problem is that our political system is bought and paid for by those who hold this money and want to keep it. They are, to borrow a phrase from Adam Smith, the Masters of Mankind who hold everything for themselves and offer nothing for other people. And these Masters invest heavily in the military…not your child’s education or health care.

You can tell a lot about a nation by looking at its budget. As economist Paul Krugman points out, the United States, from a budget perspective, looks very much like an insurance company with an army. We can quibble about the details. Indeed, from a budget perspective, it sure looks like we are, as a nation, willing to provide some minimal security for our old people, significantly less for poor children and the disabled, but the most for our soldiers. As for our soldiers, the more brass on your shoulder, the better the benefit.

Everything else for anyone else is negotiable. Scientific progress. Environmental sustainability. Health care. Economic accountability. All of it is subject to discretionary attention and the slow erosion of political apathy.

So that’s why I found this post on Tom Dispatch by William D. Hartung and Mandy Smithberger interesting in the context about our debate on the Green New Deal and Medicare for All.  Hartung and Smithberger walk the reader through a tour of the United States’s military budget. Not merely the declared and accepted military budget out of the Department of Defense, but all the avenues through which tax money is diverted to the military-intelligence-industrial complex. After all, there are a great many more funding sources for our addiction to military solutions. For instance, Hartung and Smithberger point out that our nuclear program is run out of the Department of Energy. Imagine that.

So I went through their narrative and pieced together this graph. In order to put our total military spending in context, I compare it to the military spending of our next two competitors, China and Russia and two presumably “unaffordable” social giveaways, Publicly Funded (Free) College and a forty percent reduction in greenhouse gas emissions called for in the Green New Deal. Here’s the comparative:

Defense Spending

I excluded some of the expenditures from Hartung and Smithberger for reasons of simplicity. I recommend reading the original article for a comparative. I also acknowledge that China and Russia may have some alternative, non-military sources by which they supplement their military budgets. My estimates for free college (what I prefer to call “publicly funded college”) and greenhouse gas reduction are sourced below. Conspicuously, I did not include the much-debated Medicare for All or Single Payer Health Care. The expenditure model for Medicare for All was a bit more complicated for the purposes of this graphic.¹

The bottom line is, our national priorities are clear. We prioritize military dominance even to the detriment of our citizens. We could easily divert half of our total military budget into providing publicly funded college and the infrastructure for reducing greenhouse gases without having to raise a single dime in taxes. Furthermore, doing so would still leave us with an obnoxiously large military in comparison to our biggest competitors.

It’s also worthwhile to add that doing so would pay much higher dividends. It would be money more intelligently spent. After all, with the billions of dollars spent on so-called defense, are we any safer? Has our military actually improved conditions around the world as advertised? Indeed, our forever wars are not only costly in material and human terms but also largely ineffective. Monica Duffy Toft, writing in The National Interest points out, “U.S. military interventions since WWII have only rarely achieved their intended political objectives. That is, the United States has lost more than won; and when it has “won,” it has generally won at a cost far in excess of what would have been considered reasonable prior to the intervention.”

Toft is interested in understanding a seeming contradiction. “…the United States engaged in forty-six military interventions from 1948–1991, from 1992–2017 that number increased fourfold to 188.” How is it that, after the fall of the Soviet Union, the elimination of the biggest military threat in U.S. History, the United States actually stepped up–drastically–its use of military power? This fact is confounding if we make the assumption that the U.S. military exists for the purpose of defending the United States and its citizens. Such a monstrous defense, without an equally monstrous enemy, must be inherently inefficient. Who is this enemy that we are spending so much money on? Terrorists?

Terrorism is more akin to organized crime than it is a military conflict. So why do we treat it like a military conflict? Why do we fight al Qaeda in much the same way we did Nazi Germany? The simple answer is, that’s the military that we have. We have this colossal war machine. It’s the perfect institution for laying waste to armies and taking down nation states. It is woefully inadequate for fighting organized crime. But we have a hammer, so terrorism must be treated like a nail. With a smaller military budget, maybe we might be inclined to open our toolbox a bit more to deal with the problems we have.

In cases where we have used our military for its intended purposes, namely in successfully overthrowing the nation states of Afghanistan and Iraq, the military has proven even more inadequate for dealing with the consequences. Specifically, we defaulted to the military when it came to nation-building. Of course, this task is exactly the opposite of what the U.S. military is designed to do. It should come as no surprise that this mission failed. Iraq descended into a hellscape of armed aspirants of power, and the governing elite in Afghanistan simply took to the hills and waited until the coast was clear to sweep back in and pick up where they left off.

And there’s not a thing our obnoxiously overfunded military can do about it.

If we assume that the mission of the U.S. military is, at this point, to defeat terrorism, we must admit that we are not getting our money’s worth. On the other hand, if we look at fighting terrorism as only one component of the military industrial complex a more comprehensive analysis becomes clear.  Of course, fighting terrorism and taking out unfriendly regimes is not the only mission of the United States military. It’s merely the sideshow. This is where we really get to the underlying theme of American military priorities and why we can’t afford to pay for anything else. The U.S. military in concert with its NATO allies is the primary police force of the global economic elite–previously referred to as the Masters of Mankind.

I happened to stumble upon the Tom Dispatch post as an interlude to reading Peter Phillips’ Giants: The Global Power Elite. In Giants, Phillips takes the reader on a tour of the wealthiest of the wealthy and, with a veritable spider web of yarn and thumbtacks, he meticulously maps out how they are all interconnected in a matrix he refers to as the Transnational Capitalist Class (TCC).

Why is it that, in the wealthiest nation in the world…arguably the wealthiest nation in history…we cannot afford benefits that are taken for granted everywhere else, yet we can afford to write a blank check to an ineffectual military?

Phillips answers this question, rendering the incentives into sharp contrast. What must be understood is that the U.S. military is an operative not of the American people, but of the global capitalist elite. As such, the U.S. military budget, as obnoxious as it is, represents chump change to this Transnational Capitalist Class.

The numbers are familiar to anyone with even a cursory understanding of global inequality. According to Phillips:

The world’s total wealth is estimated to be close to $255 trillion, with the United States and Europe holding approximately two thirds of that total; meanwhile, 80 percent of the world’s people live on less than $10 per day, the poorest half of the global population lives on less than $2.50 per day, and more than1.3 billion people live on only $1.25 per day.

What exactly does it mean that “The United States and Europe [hold] approximately two thirds of [the world’s wealth}” That’s a deceptive figure. As an American, I’m not holding anywhere near that much. Phillips references a study by Vitali, Glattfelder, and Battiston out of the University of Zurich finding that, in reality, one-hundred and forty-seven companies control about forty percent of the world’s wealth. Using Phillips’ data, that’s about $102 trillion. Furthermore, these companies are interconnected through joint investments and interlocking directorates. In other words, major owners in one company are also major owners in other companies on this list. They are, as seen through network analysis, a single entity with dozens of arms.  

journal.pone.0025995.g002
This Network Map of the world’s top companies illustrates the Global Corporate Elite can be analyzed as a singular institutional entity. 

Phillips breaks this down even further. He focuses his study on seventeen companies who, at the time he was writing, held more than $1 trillion dollars in assets. The companies are represented by the chart below:

TCC Chart

These seventeen firms, governed by a total of 199 directors, is holding more than $41 trillion in wealth assets. That’s about ten times the total U.S. budget. That’s more than twice the U.S. economy as measured by GDP. To put this in visual relief, use the chart below:

TCC Compartive

If you look at the military budget as a component of the United States government, it’s clearly bloated and obscene. However, if you look at the military budget in terms of the Transnational Capitalist Class, as an arm of global capitalism, then it’s much more proportional.

And it is fair to describe the U.S. Military and the extension of NATO as a de facto police force for the global corporate elite. The history of U.S. military support of U.S. and global capital is extensive and does not require a relitigation in this post. Phillips dedicates Chapter 5 in his book to what he defines as the U.S. Military/NATO Empire. He states, “The military empire dominated by the United States and the North Atlantic Treaty Organization (NATO) serves to protect power elite capital investments around the world. Wars, regime changes, and occupations performed by military and intelligence agencies remain in service to investors’ access to natural resources, free flow of capital, debt collection, and speculative advantages in the world marketplace.” Professor Mason Gaffney, writing for the Centre for Research on Globalization, reflects this conclusion in his more specific analysis, “The primary beneficiaries of U.S. military policy are multinational corporations, particularly ones that are based are based [sic] in the U.S. …The United States is useful as a police force, and so far has been willing to be used as such, being generally partial to subsidiaries of corporations with U.S. charters.”

From the point of view of the TCC, the military is a net benefit worth investment in lobbying. The military-intelligence-industrial complex serves the needs of the corporate elite in two ways. First, it is a source of protection and security for TCC investments. The U.S./NATO force supports corporate-friendly national leaders, maintains secure trade routes, and takes part in expanding and securing markets while guaranteeing that any attempt on the part of exploited indigenous people is suppressed. Phillips begins chapter five by reminding us that “[t]he power elite inside the Transnational Capitalist Class continually worry about the unruly exploited masses rising in rebellion.”

The TCC, however, sees this benefit as one of which the costs can be externalized. In other words, the costs of providing military and intelligence services to the global corporate elite is to be publicly financed by the citizens of target nations like the United States and the European Union. The profits or surplus value added by this policing authority, however, contributes to further accumulation of wealth for the TCC. It’s a perfect shell game.

Secondly, the military-intelligence-industrial complex benefits the TCC by serving as a locus of private investment. Here, Phillips offers an incisive and comprehensive primer of TCC investments in the top three weapons producers in 2017, Lockheed Martin, Northrop Grumman, and Boeing. Below is a breakdown of Lockheed’s TCC Investors. Lockheed is typical of the big three, and almost certainly representative of every military contractor.

Lockheed Martin Corporation TCC Investors/amount Invested in Billions of Dollars 2017

  • State Streee/$15.2
  • Capital Group/$12.17
  • Vanguard Group/$6.5
  • BlackRock/$6.1
  • Bank of Amereica/$3.1
  • UBS/$.902
  • Bank of NY Mellon/$.733
  • Fidelity Investments/$.721
  • Morgan Stanley & Co./$.703
  • Goldman Sachs Group/ $.474
  • Prudential Financial/$.449
  • Credit Suisse/$.149
  • Allianz/$.082
  • JPMorgan Chase/$.055
  • Amundi/Crédit Agricol/$.054
  • Barclays plc/$.05

Dividends from these investments are distributed to the aforementioned 199 directors and investors of the TCC top 17. Much of this money is sheltered. If it’s taxed, it is taxed at the low capital gains rate, currently 20% at the top margin.

This analysis draws two conclusions.

First, there’s plenty of money for everyone to get the benefits that they want and need. There’s absolutely no need to have debates about raising taxes, deficits or MMT. All such arguments are distractions. If we want to pay for things like Medicare for All, Free College, or the Green New Deal, we need look no further than the coffers of the Transnational Corporate Class. That we don’t do so speaks more about our priorities than it does about the state of our budget. It should not be too much to ask the TCC to finance those programs that would benefit the Demos. After all, the TCC does not hesitate to demand public financing of its enforcement arm.

Secondly, the clearest indication that our priorities are skewed is the existence of our lopsided military spending. The low hanging fruit to begin talking about how we are going to pay for the things that we want and need is the bloated, unaccountable, graft-ridden military-intelligence budget that does little to advance the needs of the Demos, but serves as a boondoggle to the global corporate elite.

The next time someone brings up the conundrum of paying for the Green New Deal, or anything else, the only necessary response is “The top seventeen companies in the world have over $40 trillion.” Nothing more needs to be said.

 


 

  1. The complication that I ran into with regard to Medicare for All hangs on the fact that we already provide “medical care” for many at tremendous costs and with huge inefficiencies. Presumably, Medicare for All would replace our current system. If I include the costs for Medicare for All absent the context of the costs of our current system, the bar dwarfs our military spending. If I account for existing expenditures, based on results from the conservative Mercatus Center, the graph looks something like this. Even this is a distortion, however, since it’s impossible to really understand the costs of transitioning from a pay for service system to a single-payer system. For this reason, I left it off the graph.

Defense Spending 2

Sources for chart

http://www.tomdispatch.com/post/176561/tomgram%3A_hartung_and_smithberger%2C_a_dollar-by-dollar_tour_of_the_national_security_state/#more

https://www.theatlantic.com/business/archive/2014/01/heres-exactly-how-much-the-government-would-have-to-spend-to-make-public-college-tuition-free/282803/

https://www.nationalpriorities.org/campaigns/us-military-spending-vs-world/

https://knowledge.wharton.upenn.edu/article/a-renewable-world-what-will-it-cost/

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