Can We Cut Military Spending by $ 1.0 trillion?

The Obama administration’s deficit commission is due to report out on its recommendations to put the US on firm financial footing, but apparently some don’t like the trial balloons they’re seeing.  Conventional wisdom points to entitlements and the old bogeyman, welfare, being the major problems when it’s actually military appropriations that are sucking up the tax dollars.   The reason that social security and Medicare taxes are specifically earmarked when deducted from your paycheck relates to the fact that they’re supposed to be strictly held to fund those benefits.  Instead those funds were raided to fund general government expenditures including wild military spending.  Hence, the looming crisis in the social security entitlement is at least partly attributable to the money being used for expenditures other than what those taxes were earmarked for.  This held down overall income tax rates, hence masking the cost of maintaining the wild and unnecessary levels of military expenditures.

The chart above breaks down the percentage of worldwide military expenditure by major power.  Our nation not only spends nearly half of the worldwide military expenditures, but likely drives a good portion of the remaining half with weapons exports subsidized by the US taxpayer.  You’ll note that big bad Iran is nowhere to be seen on the chart.  They have a infinitesimal sliver of the 14.7% of spending attributed to the “rest of the world”, yet we’re gearing up to attack them.

When it comes to the fiscal solvency of the US, this is the elephant in the room that no one discusses.  Instead, we have to hear about the supposedly ruinous health care legislation or other nonsense that really impacts nothing. This situation is no more sustainable that the Wall Street derivative machine and ultimately relies heavily not on domestic savings but those of China and OPEC.  In other words, our domestic savings is insufficient to fund the war machine, so we rely on China, the Saudi’s and others to buy our government debt so as to finance our military expenditures, interventions and incursions in various parts of the globe. There will come a day where they will no longer do that and when they do, this game is up.  That day may be coming sooner rather than later in light of our saber rattling with China with the recent war games with South Korea and the talk of neutralizing China’s new anti carrier missile.  China is certainly not going to finance a war machine that threatens it which makes the whole recent scenario with them pure insanity.  All they have to do is stop buying treasuries, or worst, sell off  their holdings.  Either step would result in a dramatic rise in long term rates and would reverberate across the entirety of the economy, but most directly on the fiscal condition of the US government itself.

The US needs to cut all of the military spending as a matter of survival more than anything else.  This is the only real choice.

There are few people who tell the truth about this on either side of the aisle, but it seems that Barney Frank and Ron Paul have come together with a proposal to the debt commission on cutting the military spending by $ 1.0 trillion, which former Reagan assistant treasury secretary Paul Craig Roberts discusses in the video below.  Roberts and others suggest that we’re running out of time on this as that cut needs to occur within the next 2-3 years and not over ten as suggested by Barney and Paul.  I should point out here that Roberts, like the disaffected David Stockman, was one of the architects of Reaganomics and now regrets his involvement and disowns the current version of the GOP.

  • http://diasporablack.blogspot.com Black Diaspora

    Let's see. Where do I begin? Russia, supposedly the biggest threat on the pie chart for the U.S., expends less money for its military than the U.K. China, on the other hand, expends almost twice as much as Russia. I would like to see where Japan fits into all of this, but that nation isn't specified.

    If the largest spenders here represent the biggest threat to the U.S., then it would have to be China, although we spend almost seven times the money they spend on their military.

    What has happened it seems over the years is that the U.S. has taken upon itself the military defense of those countries that fall within our purview (our circle of interest), while those countries have put more and more of their tax dollars into their social programs.

    I'm not sure if the American people bargained for this kind of role–Protector of the World–although that role has devolved to us, either by design or by default.

    "There will come a day where they will no longer do that and when they do, this game is up. That day may be coming sooner rather than later in light of our saber rattling with China with the recent war games with South Korea and the talk of neutralizing China’s new anti carrier missile."

    Let me offer you another viewpoint: What if all of this is planned to provoke China to do the unthinkable, to move against the U.S. hostilely, either financially, or militarily?

    A hostile action would elicit an immediate cancellation of our debt, and our obligation to pay. Pundits are already discussing this eventuality and possible outcome to a Chinese action against this country. At best, it could very well keep China at bay, but China would probably not extend further credit to the U.S. in terms of their investing in our bonds.

    Nevertheless, an economically strong U.S. is in China's interest. Domestic consumption cannot drive, as yet, China's manufacturing behemoth, the growth of which has that nation now surpassing Japan in GNP. China still need exports to fuel their growth, if they ever hope to be number one in the world, which I believe is their real goal.

    Here's the unvarnished truth: American's are a scared bunch. We've done so much crap around the world, meddled in so many nation's business, that a strong military is seen as a strong deterrent to our adventurism abroad.

    Therefore, It would be political suicide for the party that proposes such a plan, and seeks to carry it out. And no party, Democrat or Republican, is going to propose it unilaterally, for fear that the other will use it to score a political edge at the polls.

    Unfortunately, it's politics that determine our national policies, not commonsense, or reason.

  • http://theafricanamericanclarioncall.com Greg L

    "Let me offer you another viewpoint: What if all of this is planned to provoke China to do the unthinkable, to move against the U.S. hostilely, either financially, or militarily? "

    BD, I never thought of that, but that makes a lot of sense. There's no way that we're going to be able to pay them back and the exposure of them dumping their treasury holdings is immense. Our fiscal picture would brighten if we defaulted and stiffed everyone who holds our debt.but that's something that's not without consequence.

    One of the things that underpins our currency greatly is our 1970's agreement with OPEC to trade oil in dollars. In effect that forces every nation to maintain a horde of dollars simply to be able to buy oil. A default might very well tear away at that regime as we would have effectively admitted the worthlessness of our currency and our promises. That might make it very difficult for someone to give up a valuable resource like oil in exchange for a promise that means nothing. But the powers that be are a couple of steps ahead of that one considering our involvement in Iraq, Afghanistan and possibly Iran. They're fully aware of this possibility, so the response is to eliminate the exchange issue by controlling the energy sources outright. The fact that this results in misery abroad and the misappropriation of tax dollars here is besides the point in their thinking.

  • http://www.diasporablack.blogspot.com Black Diaspora

    "A default might very well tear away at that regime as we would have effectively admitted the worthlessness of our currency and our promises."

    I'm not advocating a default, but who would blame us if we're attacked without a clear provocation? That's one reason for China to keep its distance.

    One benefit of said default: We'd turn to a "green economy" in ernest. As it stands now, it's facing opposition. Further, a modification of that OPEC agreement (if it comes to that) would allow OPEC to move to another currency, or currencies, at a time when the world economies are soft. I'm betting that they'd rather stay on our currency than resort to another one that's less secure. The Euro, for example, has come under some stress of late, and had to be rescued. Floating our currency against others at this juncture may not be such a bad idea. But, then, what do I know. Economists themselves are mixed as to the course needed to reenergize t the economy, and they're the experts.

  • http://theafricanamericanclarioncall.com Greg L

    "Further, a modification of that OPEC agreement (if it comes to that) would allow OPEC to move to another currency, or currencies, at a time when the world economies are soft. I'm betting that they'd rather stay on our currency than resort to another one that's less secure. The Euro, for example, has come under some stress of late, and had to be rescued."

    Perhaps the one thing that is saving our currency right now is this OPEC agreement. Our trade imbalance is evidence that we export nothing to create a natural demand for other nations to hold dollars to buy our stuff, so if they didn't have to hold them for oil transactions, all of them would come flying home with the effect being inflation. I feel the main reason for so much focus in the middle east is to keep this particular relationship in place even more than ensuring the flow of oil. They know that any move to trade oil in another currency would mean lights out for the economy even as bad as things are now.

    The Euro was surely high flying at one point until here of late. I was listening to something this weekend that suggested that the crisis in Europe beginning with the Greece contagion was something that was created to bring down the Euro to end the threat that it would replace the dollar as the world's reserve currency. I'll need to listen to that again and I'm not sure what to make of it now, but one thing is clear–the US benefited from the crisis with the perception that we were the "safe haven", so given a choice between US treasuries and Euro debt, treasuries were the choice which allows us to continue to finance our profligacy and our military incursions. But this is only temporary and not sustainable over the long haul IMO.

    It just seems to me that we have the world facing the barrel of a gun and all that's going to do is result in others wanting to bring us down. It's my understanding that the one thing we have in abundance is natural gas and early in the development of cars, that was the fuel used to run some early models. Yes, the green economy and getting away from carbon based fuels makes a lot of sense, particularly as the supply begins the dwindle, but somehow what you, I and others think makes sense is never executed upon. There's too much vested interest in the existing systems, whether it be the military industrial complex, financial alchemy, conflicts over carbon based fuels and etc. It almost seems to me at times that all of these are closely linked in an economic system that is predicated on generating wealth based on misery.

    I'm not against business per se. But the more I know about some of the stuff, the more I'm disturbed about the whole thing. I just think that a lot of this is deliberately opaque so that many can't really appreciate what's really going down.

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