Peace Through Poverty: The Pentagon's New Budget

Today the Defense Secretary Chuck Hagel is announcing the the Department of Defense will deal with a shrinking budget largely by reducing the number of paid soldiers, with additional cuts coming from some weapons programs. He would not be doing that if President Barack Obama had not signed off on the ideas. Congress will, as usual, muck with the plan, as each Representative and Senator tries to protect military spending inside his or her district, no matter how at odds with the Pentagon's plans. [See 2015 DoD budget speech transcript]

Bit picture, the ability of the U.S. to bully the other nations of the world will decrease. Bullying will be more selective. We will keep all 11 aircraft carriers, which are great for threatening or bombing nations that don't toe the American line, if they border an ocean. We won't have enough soldiers to easily invade and control large countries like we did in Iraq and Afghanistan.

We should not need too. Imperialism was all fine and good from an economic, if not an ethical, standpoint, during the 20th century. But times have changed. Imperialism is a money loser. The U.S. has proven in the 21st century that it is quite capable of losing all the money it needs to domestically, without loosing even more abroad.

Anyone who does not understand that new roads and bridges in Afghanistan means potholes and collapsing bridges in the U.S. needs an economics course.

In the short run, at least, the American economy continues to recover from the deep dip of 2009. Unfortunately the nation already had a multi-trillion dollar national debt in 2000. Starting in 2002 the national deficit exploded to pay for the "war on terror," and despite that the economy nearly collapsed in 2008, due to the greed and stupidity of—admit it—not just Congress and Bush and Banks and mortgage brokers, but also relatively ordinary Americans who bought vastly overpriced McMansions and bungalows and ordinary track homes and condominiums. In other words, the same idiots, I mean citizens, who elect our Congress and Presidents.

Then in 2009 massive deficit spending began to try to revive the economy, keep people from starving, and prevent a rebellion. The result was a $17 trillion national deficit by the end of 2013. The Federal Reserve kept interest rates extraordinarily low, meaning the interest on the national debt was minimal, like those low-interest introductory mortgage offers of 2005.

As bits of the debt come due for payment the Treasury Department issues new debt. Unless the economy fails to revive, interest rates will rise. Short term debt pays the least interest, but is risky because it has to be renewed often. Long-term debt is safe once placed, but pays much higher interest. As I write this essay 3 month federal debt pays 0.043% per year, zero for practical purposes. 30 year debt pays 3.71%. 2 year debt pays 0.33%.

What the President and Pentagon are acknowledging is that as the average interest rate paid on U.S. debt increases, the amount of tax dollars available for all spending, including military spending, is going to decrease. 1% of $17 trillion is $170 billion. 5% is $850 billion. 10% is $1.7 trillion. Higher interest rates leave politicians 3 options: higher taxes to pay them, lower spending to pay them, or just taking on even more debt, no matter what the interest rate.

Wars and military spending no longer stimulate the economy.

World War II stimulated the depression-era economy, but initial conditions were different back then. There was little national debt when the depression began. The war started in Europe, resulting in a couple of years of peace during which the U.S. could sell anything it could make without actually being in the war.

Iraq and Afghanistan, in contrast, were pure expense for the American taxpayer. They drained the U.S. economically the same way World War II drained the British Empire. That empire, despite its size, fell apart in the 1950s. The Brits could not afford it any longer.

America can no longer afford an empire. Expect that it will be easier for regimes independent of the U.S. to prosper in the future. Expect sane U.S. Presidents (if there were such a thing) to be very careful before committing U.S. fighters to combat in large numbers. If a President wants to both keep up the economy and a military capable of defending U.S. territory, he won't want any international adventures further draining our empty coffers.

U.S. propagandists will probably come up with a better slogan for the new policy than "Peace through Poverty." But that is the era we appear to be heading into.

Chaos in California: Brown Vetoes Democratic Budget

It almost defies parody. It is like trying to do a parody of a nuclear disaster or of a mass murder.

The Democratic Party members in the California State Senate and Assembly put together a budget without Republican help. The Republicans wanted to help by pitching welfare babies in the street and closing the public school systems. Or maybe charging tuition to attend.

I don't like to say nice things about Democratic Party politicians in the legislature. They have mainly helped bring California to the brink of disaster. Yet since I complained in the past about budgets not being passed on time, I have to say: they got it together and passed the budget on time. It is not the budget some might like, but that is the fault of the business situation in the state. Demand is low; people are not working; tax revenue is not sufficient to give folks on disability and welfare a truly middle class lifestyle. Given that a bunch of people had to agree on the budget, even if they are all Democrats, it is miraculous they forged one, and on time.

But Jerry Brown vetoed it. He wants to extend some taxes that were put in as emergency fundraising measures during the late recession. He would use those taxes to either (depending on your point of view): pay off the all-powerful public employee unions or help the kids get a better education.

Former Governor Arnold Schwarzenegger would have signed the budget, even though he was a Republican and not a single Republican elected official voted for it.

But not Jerry Brown. This is madness. This is not what people thought they would get when they voted for the guy last November.

Despite California's still high unemployment rate, the economy has been slowly recovering from the depths of the recession. Tax revenues should be up significantly in 2011 over 2010. Throwing the government into chaos is not going to help anyone right now. Muddling through is what is needed right now. Taxes should grow in 2012, too. Eventually we might restart the construction industry. Then the revenue would roll in and a lot of public service workers could be rehired. Soon workers would be sought after, new cars would roll off the lots, and we the taxpayers could even afford to give the disability fakers another $50 a month for their drug habits. Which adds to the colorfulness of California, brings in federal dollars, and makes it a tourist mecca.

But maybe this is what Brown planned all along. Maybe he really is one of those Earth First! type environmentalists who want the economy to collapse so people abandon California and let the Redwoods grow and the salmon run again.

Recall, anyone?

Republican Cuts: Loud Bark, Tiny Bite

I don't agree with the Republican consensus on much, but I do agree that the national debt and deficit are a problem that needs fixing. Unfortunately the Republicans on the House of Representatives Budget Committee have now revealed their real plans for fiscal 2011. They are not trying to cut a trillion from the $1.5 trillion deficit. They are not even cutting a tenth of that, $100 billion, as they had originally promised. They are down to cutting just $32 billion. Maybe they are hoping most people who did not go to sleep after the last election have trouble keeping the difference between a billion and a trillion clearly in mind.

Rhetoric is a campaign circus designed to delight voters. Then there is the reality of being in Washington and realizing you are just a $200,000 per year clown surrounded by trade associations that dwarf billionaires in the amount of money and clout they can heave around. Consider, too, who really gets hurt by budget cuts.

The Republicans worship, as the sacred cows in their Trinity, the Free Market, the Pentagon, and Homeland Security. So most of the imperialist bloat is off the table as far as budget cuts. That leaves what is called Domestic Spending.

Congress does not spend money unless someone lobbies for it, so every bit of spending has its defenders. Republican rhetoric is that spending goes mostly to welfare bums and to bureaucrats who spend their days sharpening pencils for writing more regulations.

Consider Food Stamps. That's just a taxpayer give away to welfare bums, right? Wrong. It is a direct subsidy to two big, Republican-dominated, corporate industries. Grocery stores love food stamps. Corporate agriculture loves food stamps. Food stamps don't amount to much for any given family on welfare, but aggregate them over say a chain of Safeway stores or Archer Daniels Midland, and those billions become uncuttable.

And so the mostly middle-class angry men of the Tea Party and their leader Calamity Jane can elect all the prayer-obsessed idiots they want to Congress. Without food stamps the Free Market degenerates into ruinous competition. Same for funding science. Same for funding just about everything.

The $32 billion in cuts were so small the New York Times article did not even bother to mention exactly where they would come from.

Keeping up the rhetoric, the Democrats on the Budget Committee said the almost nonexistent cuts "will harm the economy and put more people out of work."

My guess is by the time the budget is actually passed, if it gets passed at all, another $100 billion in pork will be added in. Maybe $50 billion could be used to form a Department of Tea Party, Constitutional, and God Studies. Give all those Tea Party guys and gals good paying Federal jobs, and soon they will be singing a more harmonious tune.