War Nation

Military Keynesianism’s Iron Grip on Washington

Now that the Biden Administration has gotten the US involved in a 3rd war during his presidency, I thought I would post an article I wrote back in 2012 about the self-destructiveness of basing much of the US economy on war. Things have only gotten worse since then.

Nations are defined by what they do. For much of the post-WWII period America has been defined by wars. In almost every case these have been wars of choice rather than necessity; the Korean War, the Vietnam War, the brief wars in Grenada and Panama, the long Afghanistan War, the 2nd Iraq War and the non-localized and never ending War on Terror.

When the Soviet Union collapsed in 1991 there was discussion of a peace dividend, meaning a shift away from a wartime economy to a peacetime economy. This would entail “economic conversion” of a substantial portion of the industrial base of the US economy from “guns to butter” as they saying goes. We never did see a peace dividend, and military spending has more than doubled in the ensuing two decades.

The political and financial underpinnings of America’s War Nation status are multiple, but there is one aspect of this entrenched policy that forms the unshakable financial and political foundations of our military industrial complex. This is the concept of military Keynesianism. Keynesianism, named after the 20th-century English economist John Maynard Keynes, is the term for when the federal government spends revenues to boost economic activity, which can be especially important during economic downturns. Virtually all Republicans and even many Democrats decry Keynesian economics in all cases save one; military spending. Neoconservatives and neoliberals alike prefer military spending to all other forms of government spending. So in fact, almost all US politicians are Keynesians, it is just that most are strict military Keynesians. This mindset has become so entrenched in American politics that it is no longer questioned by most Democrats or Republicans, with the result that nearly half of discretionary spending in the US is military related. In the guns vs. butter equation this is allocating almost equal amounts of spending to military and civilian purposes, an allotment that far exceeds the current level of military threat to our nation.

Some of the reasoning behind this is actually quite simpleminded; when the government spends vast sums of taxpayer money on the military and weapons systems it boosts economic activity, creates jobs and drives defense contractor profits without competing with any other corporation’s profit making. It doesn’t step on any corporate toes.

When Keynesian stimuli are applied, economists talk about “multiplier effects” which refers to how much of an increase in economic output (for example, increases in GDP and employment) a given government stimulus provides. Some conservative economists have argued that the Keynesian multiplier for non-military spending is zero, and hence only military spending can provide economic benefits without interfering with non-defense corporate profits. The thinking goes like this: when the government offers low-cost health insurance, for example, this cuts into private health insurance company’s profits. However, purchasing a squadron of F-22 fighters does not cut into any corporate profit-making, it just dramatically boosts profits for Lockheed Martin, Boeing and their suppliers. Because military spending does not interfere with non-military corporate profit making, but rather drives all defense industry profits, the multiplier effect seen with military spending is claimed to be substantial.

Nearly half of all discretionary government spending in the US is relegated to the military. As a taxpayer, you are probably concerned with how much “bang for the buck” you are getting from national security expenditures and the endless war on terrorism, and whether this is the best use of our limited resources. In economist-speak, this relates in part to how much of a multiplier effect you get in the economy from military expenditures versus other types of government spending. The answer is that despite significant multiplier effects within and among military contractors and their suppliers, military spending is some of the most wasteful on the planet, and the security benefits that follow are minimal as compared with the expenditures. Cost overruns, no-bid contracts, secret contracts, cost-plus contracts, bribes given to potential adversaries (e.g., Sheikhs in Iraq) and inflated hardware and services pricing all add up to enormous waste and inefficiency. So much so that the military has been unable to complete an audit of its books for years, and indeed may never be able to account for huge sums of taxpayer money gone missing.

But is it true that the Keynesian economic multiplier effect is low or nonexistent for non-military government spending? Of course not. Many forms of non-military government spending have huge multiplier effects, for example infrastructure rebuilding not only boosts construction company work and increases construction employment, but also has positive effects on transportation and commerce. It additionally gives construction workers (who may not be busy building new housing at the moment) more cash to pump into the economy, while also fixing our dilapidated roads, bridges and electric grid.

If you include reserve forces, the US military employs more people than any US company (well over 2 million); even more people than are employed in civilian government jobs. Elective wars including the “war on terror” should not be a jobs program, or an excuse for funneling vast sums of taxpayer dollars to defense contractors to keep them operational and profitable. There are highly productive and benevolent alternatives to Military Keynesianism with greater employment and multiplier effects. These include education spending which has some short term (priming), and extensive long term multiplier effects by providing an educated, functional work force. Biomedical research into the treatment of human diseases is another example, which also has extensive short term and long term multiplier effects in healthcare, pharmaceuticals, potential patents and startup companies, not to mention the effects on improved human health, longevity and productivity.

If we take biomedical research as an example of one Keynesian spending option juxtaposed with military spending it becomes clear that there are preferable alternatives for the use of tax dollars with dramatically better outcomes for Americans. The requested budget for the military in 2011 was over 700 billion dollars and this does not include all military and contractor funding for the wars in Iraq and Afghanistan or other military programs. The base budget request was $549 billion, and the so-called “overseas contingency operations” (or OCO; formally known as the “war on terror”) request was $159 billion. Now compare this with the approximately $32 billion budget for biomedical research at the NIH (less than 1/20^th of the military total), and you have an imbalance that is impossible to justify based on the threats to human life and health. Just the expenditures on the “war on terror” (OCO) dwarf the NIH budget ($159 billion vs. $32 billion). A relatively small proportion of the military budget is designated for medical research, approximately $1.2 billion in 2011, but this is still not nearly enough to move biomedical research forward rapidly. If the primary purpose of our vast military is to protect the lives of US citizens from terrorism, we are getting very little return on those expenditures. Contrast the miniscule number of lives that might have been theoretically saved by occupying Iraq and Afghanistan to the number of people who actually died from cancer in the US in 2010, which was over half a million, and you have an economic situation that is impossible to justify rationally.

In fact, rather than protecting Americans from harm the military operations in Iraq and Afghanistan have exacerbated the health problems in the US with, for example, nearly 230,000 soldiers reported to have been victims of mild to severe brain injury in the span between 2000 and 2011. Many of these returning veterans will have lifelong health issues ranging from permanent disabilities to post-traumatic stress disorder. Taken together with the number of service members who have been killed in Iraq and Afghanistan, this means that far more Americans have been killed or harmed by the war on terror than have been saved by it.

Cancer research is progressing, but only relatively slowly due to limits on funding. Many important science projects in the US are unfunded, or drastically underfunded because of the limited budget at the NIH. In 2011 the overall NIH grant acceptance rate was 20%, meaning that 4 out of every 5 grant proposals were rejected; the lowest acceptance rate ever. Even a diversion of 5% of the military budget would more than double funding at the NIH, putting many thousands of additional scientists back to work, and dramatically accelerating the search for cures to the diseases that take American lives far too soon. Plus it should be noted that like military spending basic biomedical research spending does not step on any corporate toes. Pharmaceutical companies engage in applied research into drugs, methods and devices; they do not do basic biomedical research because the paybacks are so uncertain. Without the NIH and other government-funded research organizations, basic biomedical research would not get done in the US.

Other examples of more productive and efficient uses of tax dollars would include the development and implementation of a “smart” and efficient electric grid with distributed power generation using more alternative energy sources, which would provide dramatic short term economic stimulation, as well as longer term stimulation through increased efficiency and reliability, along with reduced pollution and the resulting health benefits. Improved and expanded mass transportation systems would provide many new jobs and would stimulate the economy, commerce and leisure travel thus boosting other economic sectors including tourism while reducing gas consumption and pollution. In all of these cases the increased employment, economic multiplier and technology spin-off effects would far outweigh those seen with military spending, without the commensurate waste associated with military contracts. If the US is looking for spin-off technologies that can solve some of the world’s pressing problems while boosting our economy, we need look no further than the development of new alternative energy sources and improved energy distribution systems.

Military spending can do none of these positive things, and can only serve to maintain profits for a relatively small number of politically powerful military contracting corporations. The choice is ours to make. If we keep electing neoconservatives (like Bush) and neoliberals (like Obama) to office we will continue to be a War Nation in perpetuity. We will remain a nation with a dilapidated infrastructure, failing schools, high unemployment, high cancer death rates and the distrust of the rest of the world. The other choice is to finally begin redirecting some of our nation’s treasure and sweat toward building a better country and a better world for all by freeing Washington from the iron grip of Military Keynesianism.

Economic conversion from a wartime to a peacetime economy after WWII generated one of the greatest economic expansions in the nation’s history, and ushered in a large sustainable middle class. But ever since the drastic escalation in cold war military spending in the 1980s the United States has been in a perpetual war-economy state placing disproportionate emphasis on military spending and elective military conflicts. There was an attempt to shift from a wartime to a peacetime economy in the 1990s after the fall of the Soviet Union. But powerful lobbying and strong connections between Washington and the defense contracting industries prevented any significant shift of public funding from military to civilian purposes. Today military spending is at its highest point in history.

It will require a drastic change in mindset in Washington for even a modest shift in spending priorities to happen. Any attempt to divert military spending to more productive uses will be met with an onslaught of vicious attacks in Washington, so the job will not be easy. Defense contractors have operations in virtually every state of the Union, and this puts pressure on representatives from all states to support current military spending. These very profitable and powerful corporations will understandably go to great lengths to protect their turf. We will need strong leaders who can reframe the debate from sophomoric rhetoric about national security and terrorism to a discussion of health security, job security, retirement security, infrastructure security and long term national goals and priorities. The military industrial complex will not allow the necessary diversion of funding without one hell of a fight. But it may be possible to grease the wheels of economic conversion by initially providing tax incentives and government funding to help some defense contractors migrate their R&D and production capacity to civilian purposes. Strong public demand for reduced military spending will be the key factor in shifting the debate in Washington. Without substantial public pressure there will be no economic shift from guns to butter.

Our world-spanning military, paid for by American taxpayers, serves the interests of defense contractors and the government officials that funnel the money to them but it does not serve the American taxpayer. Terrorism does not present a greater risk to the US population than cancer, heart disease, diabetes or collapsing highway bridges. The health of the US population is more a matter of national security than real or imagined terrorist threats. Health care costs in the US are high, and growing, and one way to reverse that trend is through increased basic biomedical research into the root causes of disease, and potential treatment options. This type of funding redirection will not happen in Washington without strong pressure from the public for more research into the diseases that cause so many tragic, potentially preventable deaths. The public will have to demand healthcare over warfare or their hard-earned tax dollars will continue to be squandered in places like Afghanistan. The US does not have unlimited funds, and cannot afford to be the world’s belligerent policeman forever just to enrich the defense industry. However, with even a modest redirection of funds from the “war or terror” to education, infrastructure and research, we can save and improve far more lives while also increasing public health and boosting the economy in productive, rather than destructive ways.

President Dwight D. Eisenhower may have said it best in his Chance for Peace speech of April 16^th 1953.

“Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some 50 miles of concrete highway. We pay for a single fighter with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.  This, I repeat, is the best way of life to be found on the road the world has been taking.

This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron. These plain and cruel truths define the peril and point to the hope that comes with this spring of 1953.”

Sadly, almost 60 years later the United States is far more firmly in the grip of the military industrial complex than when President Eisenhower issued this admonition.