This is the third in a series about how to parse the varying policy proposals for the United States government emerging in advance of the 2020 election. The subject here is how to weed-whack your way through the often-inflated rhetoric on defense and defense spending to find the meat of the proposal.
Parse #1 – The great Keynesian jobs program
While usually pretending to be about concerns for the country’s national defense or external military adventures, the nomination of Patrick Shanahan from The Boeing Company to be the new Secretary of Defense lays out honestly for the first time that the massive level of “defense” spending in the United States, far exceeding that of any other country on the planet, is first and foremost a government-subsidized jobs and corporate welfare program. Defense spending reaches deep into almost every congressional district in the U.S., and so this is the one area of government spending that has wide bipartisan congressional support, with these congressmen turning off any concern for “deficit spending” when it comes to defense jobs in their respective districts. The most conservative Republicans become ardent Keynesian Socialists when it comes to those defense plants pumping money into their districts and campaign coffers.
It is even difficult to determine how much money the U.S. government injects into the economy for “military spending” but it certainly exceeds $500 billion per year, and other related spending obscured by “creative accounting” likely puts this number as high as $750 billion, with the bulk of that likely actually spent directly or indirectly inside the United States. Add to this “international aid” programs (which is really mostly domestic spending) and foreign buyers of military hardware and this part of the economy likely exceeds $1 trillion per year.
In October of last year I wrote a post about the direct hit of Hurricane Michael on Florida’s Tyndall Air Force Base, where in excess of $5 billion worth of non-airworthy F-22 jets were left on the ground in the evacuation of that base. Roundly criticized as unnecessary and inappropriate by all the military branches, this weapons program is one of the best illustrations that, for all the bluster, it is the jobs and corporate profits that are key to the defense budget. Build something expensive, then use it up or blow it up, and then replace it. The perfect business model if you have a “perpetual buyer” in the form of the federal government.
So this first parse is to try to determine what types and locations of “defense” spending are favored and which ones are criticized. Details of exactly where any proposed scale-backs would land are usually sketchy, because they often have bipartisan political downsides.
Parse #2 – What other “privatization” is hidden in the military budget?
Last March I wrote a post about how “privatization is NOT capitalism,” discussing the “outsourcing” of governmental services outside of the military budget. Much of this argument applies to military spending as well, both in terms of the major weapons systems suppliers as well as the increased outsourcing of many support services, including on-the-ground private mercenary forces.
In short, several factors in military spending defy essential characteristics of “classic capitalism.” First, rather than being truly separate from government, these businesses are “joined at the hip,” essentially granted limited monopolies on products or services. Even when there is some semblance of competitive bidding, political favoritism generally rules the day, and most suppliers of these products or services could not survive in a true open, non-government market. In addition, the “private capital” often exists in name only, with government dollar guarantees effectively propping up investors.
When we look at the classic characteristics of capitalism, most of them are missing in privatized government services. Rather than relying on open capital markets, as noted earlier, taxpayer-backed financing is common. Classically, capitalism pushes for minimal governmental interference, but privatized business depends on “big government” clearing and protecting a market niche for the chosen business, granted a limited monopoly on, say, incarceration services or waste collection services. And finally, “market pricing” of products and labor is illusory if it exists at all. A guaranteed profit margin is often built into military contracts.
When you see proposals to privatize additional services, from logistics to security, this is best read as a payoff to political contributors who stand to profit from siphoning off new pieces of governmental spending.
Parse #3 – Which of our “friends” get our weapons and military support?
The recent downplaying of the Saudi government’s hand in the murder of Washington Post journalist Jamal Khashoggi by the Trump administration laid bare a very common practice, that the “business welfare” noted in the section above extends to whom the U.S. government favors in arms purchase deals. We will overlook a lot of death and destruction, or even passively participate, such as in Saudi Arabia’s war against neighboring Yemen, if the opportunities to sell military hardware are right.
Perhaps I am being too cynical here, but the Trump administration has made nakedly apparent what has long been true, that our “Defense strategy” is uncomfortably entwined with different preferences on how to expend $1 trillion annual in economic activity. President Dwight Eisenhower, who spent most of his career as a professional soldier, has become best remembered for just one quote from a speech he made when he was leaving office:
“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.”
That “potential” became real long ago. Is any one of the candidates for President in 2020 willing to stand up against that beast?
The first part of this series, on the revenue side of the federal budget, is posted here.