[DEBATE] : Chalmers Johnson - going bankrupt... greatest threat to US

[Riaz K Tayob]

Going Bankrupt: Why the Debt Crisis Is America's Greatest Threat By 
Chalmers Johnson, Tomdispatch.com http://www.alternet.org/story/74620/

[Within the next month, the Pentagon will submit its 2009 budget to 
Congress and it's a fair bet that it will be even larger than the 
staggering 2008 one. Like the Army and the Marines, the Pentagon itself 
is overstretched and under strain -- and like the two services, which 
are expected to add 92,000 new troops over the next five years (at an 
estimated cost of $1.2 billion per 10,000), the Pentagon's response is 
never to cut back, but always to expand, always to demand more.

[After all, there are those disastrous Afghan and Iraqi wars still 
eating taxpayer dollars as if there were no tomorrow. Then there's what 
enthusiasts like to call "the next war" to think about, which means all 
those big-ticket weapons, all those jets, ships, and armored vehicles 
for the future. And don't forget the still-popular, Rumsfeld-style 
"netcentric warfare" systems (robots, drones, communications satellites, 
and the like), not to speak of the killer space toys being developed; 
and then there's all that ruined equipment out of Iraq and Afghanistan 
to be massively replaced -- and all those ruined human beings to take 
care of.

[You'll get the gist of this from a recent editorial in the trade 
magazine Aviation Week & Space Technology:

"The fact Washington must face is that nearly five years of war have 
left U.S. forces worse off than they have been in a generation, yes, 
since Vietnam, and restoring them will take budget-building unlike any 
in the past."

[Even on the rare occasion when -- as in the case of Boeing's C-17 cargo 
plane -- the Pentagon decides to cancel a project, there's Congress to 
remember. Contracts and subcontracts for weapons systems, carefully 
doled out to as many states as possible, mean jobs, and so Congress 
often balks at such cuts. (Fifty-five House members recently warned the 
Pentagon of a "strong negative response" if funding for the C-17 is 
excised from the 2009 budget.) All in all, it adds up to a defense menu 
for a glutton.

[Already, Secretary of Defense Robert Gates has said that 2009 funding 
is "largely locked into place." The giant military-industrial combines 
-- Lockheed Martin, Northrop Grumman, Boeing, Raytheon -- have been 
watching their stocks rise in otherwise treacherous times. They are 
hopeful. As Ronald Sugar, Northrop CEO, put it: "A great global power 
like the United States needs a great navy and a great navy needs an 
adequate number of ships, and they have to be modern and capable" -- and 
guess which company is the Navy's largest shipbuilder?

[There should be nothing surprising in all this, especially for those of 
us who have read Chalmers Johnson's Nemesis, The Last Days of the 
American Republic, the final volume of his Blowback Trilogy. Published 
in 2007, it is already a classic on what imperial overstretch means for 
the rest of us. The paperback of Nemesis is officially out today, just 
as global stock markets tumble. It is simply a must-read (and if you've 
already read it, then get a copy for a friend). In the meantime, hunker 
in for Johnson's latest magisterial account of how the mightiest guns 
the Pentagon can muster threaten to sink our own country. (For those 
interested, click here to view a clip from a new film, "Chalmers Johnson 
on American Hegemony," in Cinema Libre Studios' Speaking Freely series 
in which he discusses military Keynesianism and imperial bankruptcy.) -- 
Introduction by Tom Englehardt, editor of TomDispatch.]

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. Japan (2007), $41.75 billion
6. Germany (2003), $35.1 billion
7. Italy (2003), $28.2 billion
8. South Korea (2003), $21.1 billion
9. India (2005 est.), $19 billion
10. Saudi Arabia (2005 est.), $18 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 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.

[Note: For those interested, click here to view a clip from a new film, 
"Chalmers Johnson on American Hegemony," in Cinema Libre Studios' 
Speaking Freely series in which he discusses "military Keynesianism" and 
imperial bankruptcy. For sources on global military spending, please 
see: (1) Global Security Organization, "World Wide Military 
Expenditures" as well as Glenn Greenwald, "The bipartisan consensus on 
U.S. military spending"; (2) Stockholm International Peace Research 
Institute, "Report: China biggest Asian military spender."]

* Chalmers Johnson is the author of Nemesis: The Last Days of the 
American Republic, just published in paperback. © 2008 Independent Media 
Institute.