America's Top Military Chief: Debt is Main Threat to U.S. National Security ... Pentagon Must Cut Spending → Washingtons Blog
America's Top Military Chief: Debt is Main Threat to U.S. National Security ... Pentagon Must Cut Spending - Washingtons Blog

Saturday, August 28, 2010

America's Top Military Chief: Debt is Main Threat to U.S. National Security ... Pentagon Must Cut Spending

In February 2009, the head of U.S. intelligence - Dennis Blair - said that the global financial crisis was the largest threat to America's national security. All of America's intelligence agencies apparently agreed.

The same month, the chairman of the Joint Chiefs of Staff - Admiral Mullen - also agreed.

Now, Mullen is focusing on a specific economic threat. Specifically, Mullen is focusing on the debt:

The national debt is the single biggest threat to national security, according to Adm. Mike Mullen, chairman of the Joint Chiefs of Staff. Tax payers will be paying around $600 billion in interest on the national debt by 2012, the chairman told students and local leaders in Detroit.

“That’s one year’s worth of defense budget,” he said, adding that the Pentagon needs to cut back on spending.

But at least war is good for the economy, right? At least spending on defense will help the economy recover and climb out of this pit of debt, no?

Actually, no.

Nobel-prize winning economist Joseph Stiglitz has said that war can be very bad for the economy. For example, in 2003, Stiglitz wrote:

War is widely thought to be linked to economic good times. The second world war is often said to have brought the world out of depression, and war has since enhanced its reputation as a spur to economic growth. Some even suggest that capitalism needs wars, that without them, recession would always lurk on the horizon.

Today, we know that this is nonsense. The 1990s boom showed that peace is economically far better than war. The Gulf war of 1991 demonstrated that wars can actually be bad for an economy.
Stiglitz has said that this decade's Iraq war has been very bad for the economy. See this, this and this.

And as the New Republic noted last year:

Conservative Harvard economist Robert Barro has argued that increased military spending during WWII actually depressed other parts of the economy.

Also from the right, Robert Higgs has done good work showing that military spending wasn't the primary source of the recovery and that GDP growth during WWII has been "greatly exaggerated."

And from the left, Larry Summers and Brad Delong argued back in 1988 that "five-sixths of the decline in output relative to the trend that occurred during the Depression had been made up before 1942."

As I noted in January:

All of the spending on unnecessary wars adds up.

The U.S. is adding trillions to its debt burden to finance its multiple wars in Iraq, Afghanistan, Yemen, etc.

Two top American economists - Carmen Reinhart and Kenneth Rogoff - show that the more indebted a country is, with a government debt/GDP ratio of 0.9, and external debt/GDP of 0.6 being critical thresholds, the more GDP growth drops materially.

Specifically, Reinhart and Rogoff write:

The relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies...
Indeed, it should be obvious to anyone who looks at the issue that deficits do matter.

A PhD economist told me:
War always causes recession. Well, if it is a very short war, then it may stimulate the economy in the short-run. But if there is not a quick victory and it drags on, then wars always put the nation waging war into a recession and hurt its economy.
You know about America's unemployment problem. You may have even heard that the U.S. may very well have suffered a permanent destruction of jobs.

But did you know that the defense employment sector is booming?

As I pointed out in August, public sector spending - and mainly defense spending - has accounted for virtually all of the new job creation in the past 10 years:
The U.S. has largely been financing job creation for ten years. Specifically, as the chief economist for BusinessWeek, Michael Mandel, points out, public spending has accounted for virtually all new job creation in the past 10 years:

Private sector job growth was almost non-existent over the past ten years. Take a look at this horrifying chart:


Between May 1999 and May 2009, employment in the private sector sector only rose by 1.1%, by far the lowest 10-year increase in the post-depression period.

It’s impossible to overstate how bad this is. Basically speaking, the private sector job machine has almost completely stalled over the past ten years. Take a look at this chart:


Over the past 10 years, the private sector has generated roughly 1.1 million additional jobs, or about 100K per year. The public sector created about 2.4 million jobs.

But even that gives the private sector too much credit. Remember that the private sector includes health care, social assistance, and education, all areas which receive a lot of government support.


Most of the industries which had positive job growth over the past ten years were in the HealthEdGov sector. In fact, financial job growth was nearly nonexistent once we take out the health insurers.

Let me finish with a final chart.


Without a decade of growing government support from rising health and education spending and soaring budget deficits, the labor market would have been flat on its back.

Indeed, Robert Reich lamented this month:
America’s biggest — and only major — jobs program is the U.S. military.
Back to my January essay:
Raw Story argues that the U.S. is building a largely military economy:

The use of the military-industrial complex as a quick, if dubious, way of jump-starting the economy is nothing new, but what is amazing is the divergence between the military economy and the civilian economy, as shown by this New York Times chart.

In the past nine years, non-industrial production in the US has declined by some 19 percent. It took about four years for manufacturing to return to levels seen before the 2001 recession -- and all those gains were wiped out in the current recession.

By contrast, military manufacturing is now 123 percent greater than it was in 2000 -- it has more than doubled while the rest of the manufacturing sector has been shrinking...

It's important to note the trajectory -- the military economy is nearly three times as large, proportionally to the rest of the economy, as it was at the beginning of the Bush administration. And it is the only manufacturing sector showing any growth. Extrapolate that trend, and what do you get?

The change in leadership in Washington does not appear to be abating that trend...[121]
So most of the job creation has been by the public sector. But because the job creation has been financed with loans from China and private banks, trillions in unnecessary interest charges have been incurred by the U.S.And this shows military versus non-military durable goods shipments:

[Click here to view full image.]

So we're running up our debt (which will eventually decrease economic growth), but the only jobs we're creating are military and other public sector jobs.

PhD economist Dean Baker points out that America's massive military spending on unnecessary and unpopular wars lowers economic growth and increases unemployment:
Defense spending means that the government is pulling away resources from the uses determined by the market and instead using them to buy weapons and supplies and to pay for soldiers and other military personnel. In standard economic models, defense spending is a direct drain on the economy, reducing efficiency, slowing growth and costing jobs.
A few years ago, the Center for Economic and Policy Research commissioned Global Insight, one of the leading economic modeling firms, to project the impact of a sustained increase in defense spending equal to 1.0 percentage point of GDP. This was roughly equal to the cost of the Iraq War.

Global Insight’s model projected that after 20 years the economy would be about 0.6 percentage points smaller as a result of the additional defense spending. Slower growth would imply a loss of almost 700,000 jobs compared to a situation in which defense spending had not been increased. Construction and manufacturing were especially big job losers in the projections, losing 210,000 and 90,000 jobs, respectively.

The scenario we asked Global Insight [recognized as the most consistently accurate forecasting company in the world] to model turned out to have vastly underestimated the increase in defense spending associated with current policy. In the most recent quarter, defense spending was equal to 5.6 percent of GDP. By comparison, before the September 11th attacks, the Congressional Budget Office projected that defense spending in 2009 would be equal to just 2.4 percent of GDP. Our post-September 11th build-up was equal to 3.2 percentage points of GDP compared to the pre-attack baseline. This means that the Global Insight projections of job loss are far too low...

The projected job loss from this increase in defense spending would be close to 2 million. In other words, the standard economic models that project job loss from efforts to stem global warming also project that the increase in defense spending since 2000 will cost the economy close to 2 million jobs in the long run.
The Political Economy Research Institute at the University of Massachusetts, Amherst has also shown that non-military spending creates more jobs than military spending.

So we're running up our debt - which will eventually decrease economic growth - and creating many fewer jobs than if we spent the money on non-military purposes.
As I wrote last month:

It is ironic that America's huge military spending is what made us an empire ... but our huge military is what is bankrupting us ... thus destroying our status as an empire.

Even Admiral Mullen seems to agree:

The Pentagon needs to cut back on spending.

“We’re going to have to do that if it’s going to survive at all,” Mullen said, “and do it in a way that is predictable.”

Indeed, Mullen said:
For industry and adequate defense funding to survive ... the two must work together. Otherwise, he added, “this wave of debt” will carry over from year to year, and eventually, the defense budget will be cut just to facilitate the debt.
Secretary of Defense Robert Gates agrees as well. As David Ignatius wrote in the Washington Post in May:

After a decade of war and financial crisis, America has run up debts that pose a national security problem, not just an economic one.


One of the strongest voices arguing for fiscal responsibility as a national security issue has been Defense Secretary Bob Gates. He gave a landmark speech in Kansas on May 8, invoking President Dwight Eisenhower's warnings about the dangers of an imbalanced military-industrial state.

"Eisenhower was wary of seeing his beloved republic turn into a muscle-bound, garrison state -- militarily strong, but economically stagnant and strategically insolvent," Gates said. He warned that America was in a "parlous fiscal condition" and that the "gusher" of military spending that followed Sept. 11, 2001, must be capped. "We can't have a strong military if we have a weak economy," Gates told reporters who covered the Kansas speech.

On Thursday the defense secretary reiterated his pitch that Congress must stop shoveling money at the military, telling Pentagon reporters: "The defense budget process should no longer be characterized by 'business as usual' within this building -- or outside of it."


  1. Stiglitz does not really address why WWII would not have broken the dynamic of the 1930s great crisis. IMO it is because war economy then was not just mere public spending in the military-industrial complex, nowadays much more privatized than back then, but because it implied massive central planning of the economy with the pretext of the war effort.

    It probably would not work today so well but it was ideal in the context of "Fordism" (mass production, disciplinary socio-economical system) that existed back then (but not anymore since the 1960s/70s). This is illustrated maybe even better by the once impressive success of the Soviet Union under such a system (and its eventual failure in the "Toyotist" global context we have nowadays, to which it was unable to adapt).

    Another factor that is often ignored is that back then colonialism (and neocolonialism) was in full swing, allowing to charge most of the bill ultimately to backward dependent areas such as Africa, Latin America and most of Asia. This colonialist extra surplus allowed for extra wealth in the centers of the Capitalist (and imperialist) system. Nowadays however most of the former colonies are truly sovereign and are looking for their own development, suppressing most of that extra wealth and even competing directly with metropolitan products.

    With peripheral workers and Earth squeezed to the limit, the only capitalist solutions available to the central countries (USA, West Europe, Japan...), to The Empire are:

    1. getting indebted (using the past prestige, the blackmail power of corporations and armies, the fact of the dollar being the monetary reference --which can be devalued).

    2. redistribute some (or most) of the load to central ("western") workers by means of cutting social expending, lowering salaries and working conditions and class-blind taxation (such as indirect taxes that are paid not by income but because of consuming certain products). This is favored by the relative lack of organization, conscience and struggle power that Western workers display nowadays.


  2. (cont.)

    In other words, the same that India and China need to exploit large sectors of their own people (internal colonialism), the Western Empire "needs" to do the same... or go socialist, what won't do without a fight, of course. The costs that in the past were paid by the Third World are now more and more directly charged to Western workers. Unemployment is, naturally, part of the deal, forcing people to work for less and in worse conditions. Full employment in Capitalism can only happen if it's subsidized by global "colonial" exploitation, what is every day less and less possible.

    Here is where wars and invasions come "handy": they pretend to secure at least some of those key "colonial" resources and put pressure to rising competitors like China (but also Russia and even Brazil) in key areas. The US and European "boys" are in Afghanistan because Central Asia is key in this power game and no other reason. Similarly the wars with Iraq gave key access to another strategic semicolonial region: the Persian Gulf/West Asia (where the USA had almost no bases before the Kuwait War). They are not intended to drive the economy but to secure resources and check Eurasian independent competitors.

    But (neo-)colonialism/imperialism produces less and less profit margin: military expenditure has gone overboard and the benefits are not generally worth it. But what else can the Empire do if it wants to stay as Empire?, if it wants to remain Capitalist? Exploit more efficiently its own "central" working class. In other words: following the same path of India or China by distributing a growing deal of the costs to the local workers.

    The risk is of course to increase class war, probably in novel forms, at the very heart of the Capitalist system. But at the moment is the point of less resistance (because of lack of class consciousness and organization), so the "central" capitalists and their Empire are heading that way. However in the mid-run, this strategy can only lead to a revolutionary situation and, probably, to a change of system. However the system can go (more) "fascist" as reaction, but let's not forget that, like Stalinism, fascism as such should have great difficulties existing in this post-disciplinary ("social worker" in Negri's terms) late period of Capitalism. So it'd be very unstable at best, specially as it cannot really solve the problems either (nor go to a decisive all-war scenario like WWII because of nuclear containment... and general disbelief).

  3. LOL, Pentagon cut spending? thatll never happen!

  4. Viewing American History over the last 25 years, I have to laugh at the corrupt “Global Empire” that has taken over and has destroyed American Main Street Capitalism, Free enterprise, and Competitive Market along with our Freedom (debt), Independence and American Democracy. That is pathetically funny, considering the globalization oafs that supported it. Ha. Ha.

    The magnitude of the corruption, Treason and stupidity has finally culminated and can no longer be denied even by Main Street Media.
    Multinational Corporations Keynesian economic “Free Trade agreements” is hilarious. Remember G.M (U.S.A), they are building a 500 million dollar parts assembly plant in the Narco/bankster state of Mexico employing 460 Mexicans with our bailout money; 4.5 billion investment to follow later on. Ha. Ha.

    Imagine the non-performing U.S.A and the puppet Narco/bankster state of Mexico suing the State of Arizona over illegal immigration. Ha. Ha.

    Hey Mexico, why shouldn’t we have the same policy standards of Americans immigrating to Mexico as Mexicans immigrating to the U.S.A? Ha. Ha.

    To bad that the million plus force of Homeland Security agents looking for Terrorist refuse to enforce the law and close the open border with Narco/bankster Mexico. Ha. Ha.

    If Homeland Security would have been patrolling the border with drone aircraft, they would have prevented the execution of 72 immigrants along with the other groups of immigrants of 25, 17 etc that were slaughtered by the Zetas near the border. War on Terrorism! Ha. Ha.

  5. There are certain issues where people tend to ignore or overlook prudent judgements of value. The military is one of those issues for many people. The value of the outcomes, as with the costs, can be hard to quantify. An Afghan insurgent living on less than $200 a month can fire a 10 cent bullet and kill a soldier that cost American taxpayers over a million to train, equip, and deploy.

    But it is still politically a hard sell to stand up and tell the American people we need to cut funding for our military instead of cutting funding for extra-constitutional (or loosely constitutional) objectives set by the federal government through a wildly expansive interpretation of the interstate commerce clause.

    Try making the rhetorical case that America's wasteful military spending is more urgent than earmark or campaign finance reform. Put a value on the number one seat in international politics, then make me want to give that up instead of cutting redundancy and increasing efficiency (or cutting some services altogether) in our alphabet soup of federal agencies.

    I realize the problem is big and low hanging fruit may not fill the basket. Defense is one of the largest pie slices and thus is one of the easiest targets for reduction. And defense is likely to have at least a few cuts it can make easily and responsibly.

    The absurdity comes from the fact that the military is the one thing that the constitution clearly mandates the federal government spend its money on. Of course, in the constitution, the US military exists for homeland security. Now we have a (redundant, inefficient) federal agency for that.

  6. The graphs in this article reminds me of Wages of Destruction by Adam Tooz, a scholarly review of economic history of the Third Reich. As the militarization of the economy expanded, consumer manufacturing and the production of capital goods for peaceful commercial purposes largely disappeared. Ultimately, the balance of payments problem forced Germany to a "now or never" sentiment whereby peak military development needed to be used at its apex or the military advantage would be lost. In other words, an increasingly aggressive foreign policy of brinkmanship and invasions and the concommitant self destruction of the "homeland" economy.

  7. Didn't Ron Paul say this same thing back in 2008?

  8. We need to stand behind the military chiefs who DONT want to bomb Iran or Pakistan. I am disgusted with 'Wars = Profit Margins, while American prosperity and dignity be damned.

  9. America needs to realize that shuffling papers is not productivity. The paracite Government and the paracite Unions grew too much for the remaining economy to be able to grow, even before 911. Bureaucuracy and regulation drains an economy. Too much manufacturing has been moved owerseas to escape our high costs of labor, taxation, and education. We have lost our former advantages in both knowledge and ability. Welcome to the Global Economy. Our industrialization had given our nation a great advantage. Now, many emerging nations are just as capable in industry as we are. So, we compete on their soil to trim the excessive overhead costs of labor, regulation, property taxes, employment taxes, employee benefits, and income taxes. This has resulted in our government wage rates increasing while our non-government wage rates proportunately decreased as skilled jobs were exported. Government wage rates should not be higher than their equivalent civilion job positions. Non-military government wages need cut. Government needs shrunk. Don't put all the blame on military spending. Much of the blame deservedly goes to Government expansion. And the current administration is the worst offender in rampantly expanding government. All government spending needs forever capped at a fixed ratio of domestic GDP, much smaller than the current ratio. As our industrial base flees, so must the government shrink. The success of Government should be measured by the success of the ecomony. Shrink the expanded role of Government. If the private economy is not growing, the Government should not be allowed to grow. By the looks of these charts, the Government has a lot of shrinking to do, to catch up with the decade(s) of non-growth of the domestic non-governmental economic sector. Civilian employees and companies have taken the hit. Let the Government employees face job losses, hour reductions, pay cuts, and position and organization eliminations. We just do not need this much Government. When Government becomes less of a paracite, and less burdensome, maybe industy will be able to justify expanding on our own soil. America needs to realize that shuffling papers is not productivity, even if it is high tech. Many of the current functions of our Government are not really necessary.

  10. It is very important to understand how "war helps the economy" as so many folks say. That statement was true to a significant degree when applied to the USA in WW2... but is blatantly FALSE in most other cases. Why is obvious, if you bother to think about it honestly.

    To fight WW2, the government funded massive spending on development of technologies to create advanced weapons. After WW2 was over, many if not most of these technologies were found to have many industrial, commercial and consumer applications. In this way, the spending on R&D, engineering and technology during WW2 did in fact enable a very healthy economy in the USA in the years following WW2.

    This cannot be repeated in the USSA today. Why? Because the government has been spending like a drunken sailor to continuously improve military technology ever since WW2. Therefore, fighting wars today has ZERO positive influence on the country but still has MASSIVE negative influence, as all wars do.

    Therefore, the best attitude about war today is... avoid them like the plague. Then some of the spending on military technology will benefit the industrial, commercial and consumer economy --- without much of the destruction consequences of physical war. The USSA should get out of the middle-east, and close 500~600 of the ~750 military bases in foreign countries. THAT would be great for the economy of the USSA (formerly USA).

  11. This is exactly Osama Bin Ladin planned and hope will happenned to our society, economy and country as a whole. He/they spent a few tens of thousands dollars to attack us and succeeded. While we were so dumb/stupid/moronic/embecile enough to spend thousands of our soldiers lives and over a trillion dollars so far to fight back(tactically wrong modes)as a war.

    It's not a war it's a skirmish(battles) so we must fight them a series of battles which are much cheaper and will achieve better results without pissed off a billion Muslim.

    These are but a few thousands hardcore murderers who used Islam as a cover to recruit, armed, brianwashed and sent these misguides to attack us. When they attacked us we unfortunately had a very unintelligent persons lead us at the times plust he/they had an ax to grind that's why we left Afganistan for Iraq. You know what happened next.

    As a country we are on the path of total economic collapse. It's a matter of time before that will happened. Now we need to totally remove these conditions very soon.

    1. Cut Government spendings and slow gov't growth.

    2. Change our tax system and set a flat tax system that is fair and equitable. Start with 5%, 10%, 15% and top bracket of 20% with no deductions or credit what so ever.No filing necessary if you are employed by somebody. Only businesses, self employed and institutions need to file but only a few pages with no BS with tax specialist and CPA. I think these is good start.


  12. wow ralph, "this administration is the worst offender of government expansion??? here's a fact for you: the previous (bush) administration oversaw the largest expansion of government (homeland security dept.) since the new deal.

    that's a fact.

    cut government spending huh? but not the pentagon right??? typical.

    i'll tell you what ralphie-boy, you stop paying taxes and you also stay off oranized, uniform and relatively safe roadways. you should be allowed your private industry anti government libertardian utopia where on starbucks street you have to drive on the right side, and on walmart street you have to drive right down the middle, and on google street it is illegal to stop at all, and everything is private!!! seriously, before you leave, please rest assured that as soon as you arrive BP will take a giant oil dump right on your head.

    and please use paragraphs at least!

  13. Well, here's a fresh breath of sanity. The idea that squandering resources putting bombs together here, shipping them abroad, and blowing them up is somehow good for our economy is so idiodic that it's hard to imagine any thinking person buying that rubbish.

    WWII did not end the economic disaster visited upon America in the '30's, as anyone who lived through the war and its rationing and hard times will attest. The economy recovered when hundreds of thousands of men, formerly employed shooting guns, and driving ships and tanks all over the world, were dumped into the American economy and started building cars, refrigerators, phone lines and supplying all the things that make life good.

  14. What about the aspect of liquidity being injected via covert CIA drug-trafficking? Without that, wouldn't the economic house of cards come tumbling down? I have a collection of evidence and allegations here:

  15. Also what do you think about my theory that war (and military intimidation of other nations) is an economic "stimulus" in the sense that it enforces dollar hegemony?

    As for Robert Gates, can we really trust him? I tell ya that one really surprises me. Maybe he actually has seen the light, but I still question what will be the ultimate outcome of all the anti-deficit talk. For example, take Glenn Greenwald's piece on Obama's Deficit Commission planning to make cuts in Social Security. Glenn says that was supposed to be a secret until after the midterms but Alan Simpson spilled those beans.


→ Thank you for contributing to the conversation by commenting. We try to read all of the comments (but don't always have the time).

→ If you write a long comment, please use paragraph breaks. Otherwise, no one will read it. Many people still won't read it, so shorter is usually better (but it's your choice).

→ The following types of comments will be deleted if we happen to see them:

-- Comments that criticize any class of people as a whole, especially when based on an attribute they don't have control over

-- Comments that explicitly call for violence

→ Because we do not read all of the comments, I am not responsible for any unlawful or distasteful comments.