SPEAKING
FREELY Iraq war: a nice little
earner By Ismael Hossein-zadeh
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Critics of the
recent US wars of choice have long argued that
they are all about oil. "No Blood for Oil" has
been a rallying cry for most of the opponents of
the war.
It can be demonstrated, however,
that there is another (less
obvious but perhaps more
critical) factor behind the recent increase in US
military aggression abroad: war profiteering by
Pentagon contractors. Frequently invoking dubious
"threats to our national security and/or
interests", these beneficiaries of war dividends,
the military-industrial complex and related
businesses whose interests are vested in the
Pentagon's appropriation of public money, have
successfully used war and military spending to
justify their lion's share of tax dollars and to
disguise their strategy of redistributing national
income in their favor.
This cynical
strategy of disguised redistribution of national
resources from the bottom to the top is carried
out by a combination of (a) drastic hikes in the
Pentagon budget, and (b) equally drastic tax cuts
for the wealthy. As this combination creates large
budget deficits, it then forces cuts in
non-military public spending as a way to fill the
gaps that are thus created. As a result, the rich
are growing considerably richer at the expense of
middle and low-income classes.
Despite its
critical importance, most opponents of war seem to
have given short shrift to the crucial role of the
Pentagon budget and its contractors as major
sources of war and militarism - a phenomenon that
the late President Dwight D Eisenhower warned
against nearly half a century ago. Perhaps a major
reason for this oversight is that critics of war
and militarism tend to view the US military force
as primarily a means for imperialist gains - oil
or otherwise.
The fact is, however, that
as the US military establishment has grown in
size, it has also evolved in quality and
character: it is no longer simply a means but,
perhaps more importantly, an end in itself - an
imperial force in its own right. Accordingly, the
rising militarization of US foreign policy in
recent years is driven not so much by some
general/abstract national interests as it is by
the powerful special interests that are vested in
the military capital, that is, war industries and
war-related businesses.
The magnitude
of US military spending Even without the
costs of the wars in Iraq and Afghanistan, which
are fast surpassing half a trillion dollars, US
military spending is now the largest item in the
federal budget. Officially, it is the
second-highest item after Social Security
payments. But social security is a self-financing
trust fund. So, in reality, military spending is
the highest budget item.
The Pentagon
budget for the current fiscal year (2007) is about
$456 billion. President George W Bush's proposed
increase of 10% for next year will raise this
figure to over half a trillion dollars, that is,
$501.6 billion for fiscal year (FY) 2008. A
proposed supplemental appropriation to pay for the
wars in Afghanistan and Iraq "brings proposed
military spending for FY 2008 to $647.2 billion,
the highest level of military spending since the
end of World War II - higher than Vietnam, higher
than Korea, higher than the peak of the Reagan
buildup". [1]
Using official budget
figures, William D Hartung, senior fellow at the
World Policy Institute in New York, provides a
number of helpful comparisons:
Proposed US military spending for FY 2008 is
larger than military spending by all of the other
nations in the world combined.
At $141.7 billion, this year's proposed
spending on the Iraq war is larger than the
military budgets of China and Russia combined.
Total US military spending for FY2008 is roughly
10 times the military budget of the second-largest
military spending country in the world, China.
Proposed US military spending is larger than
the combined gross domestic products (GDP) of all
47 countries in sub-Saharan Africa.
The FY 2008 military budget proposal is more
than 30 times higher than all spending on State
Department operations and non-military foreign aid
combined.
The FY 2008 military budget is over 120 times
higher than the roughly $5 billion per year the US
government spends on combating global warming.
The FY 2008 military spending represents 58
cents out of every dollar spent by the US
government on discretionary programs: education,
health, housing assistance, international affairs,
natural resources and environment, justice,
veterans' benefits, science and space,
transportation, training/employment and social
services, economic development, and several more
items. [2]
Although the official military
budget already eats up the lion’s share of the
public money (crowding out vital domestic needs),
it nonetheless grossly understates the true
magnitude of military spending. The real national
defense budget, according to Robert Higgs of the
Independent Institute, is nearly twice as much as
the official budget. The reason for this
understatement is that the official Department of
Defense budget excludes not only the cost of wars
in Iraq and Afghanistan, but also a number of
other major cost items. [3]
These
disguised cost items include budgets for the Coast
Guard and the Department of Homeland Security;
nuclear weapons research and development, testing,
and storage (placed in the energy budget);
veterans programs (in the Veteran's Administration
budget); most military retiree payments (in the
Treasury budget); foreign military aid in the form
of weapons grants for allies (in the State
Department budget); interest payments on money
borrowed to fund military programs in past years
(in the Treasury budget); sales and property taxes
at military bases (in local government budgets);
and the hidden expenses of tax-free food, housing,
and combat pay allowances.
After adding
these camouflaged and misplaced expenses to the
official Department of Defense budget, Higgs
concludes: "I propose that in considering future
defense budgetary costs, a well-founded rule of
thumb is to take the Pentagon's (always well
publicized) basic budget total and double it. You
may overstate the truth, but if so, you'll not do
so by much." [4]
Escalation of the
Pentagon budget The Bush administration's
escalation of war and military spending has been a
boon for Pentagon contractors. That the fortunes
of Pentagon contractors should rise in tandem with
the rise of military spending is not surprising.
What is surprising, however, is the fact that
these profiteers of war and militarism have also
played a critical role in creating the necessary
conditions for war profiteering, that is, in
instigating the escalation of the recent wars of
choice and the concomitant boom of military
spending. [5]
Giant arms manufacturers
such as Lockheed Martin, Boeing, and Northrop
Grumman have been the main beneficiaries of the
Pentagon's spending bonanza. This is clearly
reflected in the continuing rise of the value of
their shares in the stock market: "Shares of US
defense companies, which have nearly trebled since
the beginning of the occupation of Iraq, show no
signs of slowing down ... The feeling that makers
of ships, planes and weapons are just getting into
their stride has driven shares of leading Pentagon
contractors Lockheed Martin Corp, Northrop Grumman
Corp, and General Dynamics Corp to all-time
highs." [6]
Like its manufacturing
contractors, the Pentagon's fast-growing service
contractors have equally been making fortunes by
virtue of its tendency to shower private
contractors with taxpayers' money. These services
are not limited to the relatively simple or
routine tasks and responsibilities such as food
and sanitation services. More importantly, they
include "contracts for services that are highly
sophisticated [and] strategic in nature", such as
the contracting of security services to corporate
private armies, or modern day mercenaries.
The rapid growth of the Pentagon's service
contracting is reflected (among other indicators)
in these statistics: "In 1984, almost two-thirds
of the contracting budget went for products rather
than services ... By FY 2003, 56% of Defense
Department contracts paid for services rather than
goods." [7]
The spoils of war and the
devastation in Iraq have been so attractive that
an extremely large number of war profiteers have
set up shop in that country in order to
participate in the booty: "There are about 100,000
government contractors operating in Iraq, not
counting subcontractors, a total that is
approaching the size of the US military force
there, according to the military's first census of
the growing population of civilians operating in
the battlefield," reported The Washington Post in
its December 5, 2006, issue.
The rise in
Pentagon contracting is, of course, a reflection
of an overall policy and philosophy of outsourcing
and privatizing that has become fashionable ever
since president Ronald Reagan arrived in the White
House in 1980. Reporting on some of the effects of
this policy, Scott Shane and Ron Nixon of The New
York Times recently wrote: "Without a public
debate or formal policy decision, contractors have
become a virtual fourth branch of government. On
the rise for decades, spending on federal
contracts has soared during the Bush
administration, to about $400 billion last year
from $207 billion in 2000, fueled by the war in
Iraq, domestic security and Hurricane Katrina, but
also by a philosophy that encourages outsourcing
almost everything government does." [8]
Redistributive militarism: Escalation
of military spending But while the
Pentagon contractors and other beneficiaries of
war dividends are showered with public money, low-
and middle-income Americans are squeezed out of
economic or subsistence resources in order to make
up for the resulting budgetary shortfalls. For
example, as the official Pentagon budget for FY
2008 is projected to rise by more than 10%, or
nearly $50 billion, "a total of 141 government
programs will be eliminated or sharply reduced" to
pay for the increase.
These would include
cuts in housing assistance for low-income seniors
by 25%, home heating/energy assistance to
low-income people by 18%, funding for community
development grants by 12.7%, and grants for
education and employment training by 8%. [9]
Combined with redistributive militarism
and generous tax cuts for the wealthy, these cuts
have further exacerbated the ominously growing
income inequality that started under Reagan. Ever
since Reagan arrived in the White House in 1980,
opponents of non-military public spending have
been using an insidious strategy to cut social
spending, to reverse the New Deal and other social
safety net programs, and to redistribute
national/public resources in favor of the wealthy.
That cynical strategy consists of a combination of
drastic increases in military spending coupled
with equally drastic tax cuts for the wealthy. As
this combination creates large budget deficits, it
then forces cuts in non-military public spending
(along with borrowing) to fill the gaps thus
created.
For example, at the same time
that Bush is planning to raise military spending
by $50 billion for the next fiscal year, he is
also proposing to make his affluent-targeted tax
cuts permanent at a cost of $1.6 trillion over 10
years, or an average yearly cut of $160 billion.
Simultaneously, "funding for domestic
discretionary programs would be cut by a total of
$114 billion" in order to pay for these handouts
to the rich.
The targeted discretionary
programs to be cut include over 140 programs that
provide support for the basic needs of low- and
middle-income families such as elementary and
secondary education, job training, environmental
protection, veterans’ health care, medical
research, Meals on Wheels, childcare and
HeadStart, low-income home energy assistance, and
many more. [10]
According to the Urban
Institute-Brookings Institution Tax Policy Center,
"If the president's tax cuts are made permanent,
households in the top 1% of the population
(currently those with incomes over $400,000) will
receive tax cuts averaging $67,000 a year by 2012
... The tax cuts for those with incomes of over $1
million a year would average $162,000 a year by
2012." [11]
Official macroeconomic figures
show that, over the past five decades or so,
government spending (at the federal, state and
local levels) as a percentage of gross national
product (GNP) has remained fairly steady - at
about 20%. Given this nearly constant share of the
public sector of national output/income, it is not
surprising that increases in military spending
have almost always been accompanied or followed by
compensating decreases in non-military public
spending, and vice-versa.
For example,
when by virtue of Franklin Deleanor Roosevelt's 's
New Deal reforms and Lyndon B Johnson's
metaphorical War on Poverty, the share of
non-military government spending rose
significantly the share of military spending
declined accordingly. From the mid-1950s to the
mid-1970s, the share of non-military government
spending of GNP rose from 9.2 to 14.3%, an
increase of 5.1%. During that time period, the
share of military spending of GNP declined from
10.1 to 5.8%, a decline of 4.3%. [12]
That
trend was reversed when Reagan took office in
1980. In the early 1980s, as Reagan drastically
increased military spending, he also just as
drastically lowered tax rates on higher incomes.
The resulting large budget deficits were then paid
for by more than a decade of steady cuts on
non-military spending.
Likewise, the
administration of President George W Bush has been
pursuing a similarly sinister fiscal policy of
cutting non-military public spending in order to
pay for the skyrocketing military spending and the
generous tax cuts for the affluent.
Interestingly (though not surprisingly),
changes in income inequality have mirrored changes
in government spending priorities, as reflected in
the fiscal policies of different administrations.
Thus, when the share of non-military public
spending rose relative to that of military
spending from the mid-1950s to the mid-1970s, and
the taxation system or policy remained relatively
more progressive compared to what it is today,
income inequality declined accordingly.
But as Reagan reversed that fiscal policy
by raising the share of military spending relative
to non-military public spending and cutting taxes
for the wealthy, income inequality also rose
considerably. As Reagan's twin policies of drastic
increases in military spending and equally
sweeping tax cuts for the rich were somewhat
tempered in the 1990s, growth in income inequality
slowed down accordingly. In the 2000s, however,
the ominous trends that were left off by Reagan
have been picked up by Bush: increasing military
spending, decreasing taxes for the rich, and
(thereby) exacerbating income inequality.
There were two major peaks and a trough in
the long-term picture of income inequality in the
United States. The first peak was reached during
the turbulent years of the Great Depression
(1929-1933). But it soon began to decline with the
implementation of the New Deal reforms in the
mid-1930s. The ensuing decline continued almost
unabated until 1968, at which time we note the
lowest level of inequality.
After 1968,
the improving trend in inequality changed course.
But the reversal was not very perceptible until
the early 1980s, after which time it began to
accelerate - by virtue (or vice) of Reaganomics.
Although the deterioration that was thus set in
motion by the rise of neo-liberalism and
supply-side economics somewhat slowed down in the
1990s, it has once again gathered steam under
Bush, and is fast approaching the peak of the
Great Depression.
It is worth noting that
even at its lowest level of 1968, income
inequality was still quite lopsided: the richest
20% of households made as much as ten times more
than the poorest 20%. But, as Doug Henwood of the
Left Business Observer points out, "that looks
almost Swedish next to today's ratio of 15 times".
[13]
The following are some specific
statistics on how redistributive militarism and
supply-side fiscal policies have exacerbated
income inequality since the late 1970s and early
1980s - making after-tax income gaps wider than
pre-tax ones. According to recently released data
by the Congressional Budget Office (CBO), since
1979 income gains among high-income households
have dwarfed those of middle- and low-income
households. Specifically:
The average after-tax income of the top one%
of the population nearly tripled, rising from
$314,000 to nearly $868,000 - for a total increase
of $554,000, or 176%. (Figures are adjusted by CBO
for inflation.)
By contrast, the average after-tax income of
the middle fifth of the population rose a
relatively modest 21%, or $8,500, reaching $48,400
in 2004.
The average after-tax income of the poorest
fifth of the population rose just 6%, or $800,
during this period, reaching $14,700 in 2004. [14]
Legislation enacted since 2001 has
provided taxpayers with about $1 trillion in tax
cuts over the past six years. These large tax
reductions have made the distribution of after-tax
income more unequal by further concentrating
income at the top of the income range. According
to the Urban Institute-Brookings Institution Tax
Policy Center, as a result of the tax cuts enacted
since 2001:
In 2006, households in the bottom fifth of the
income spectrum received tax cuts (averaging $20)
that raised their after-tax incomes by an average
of 0.3%.
Households in the middle fifth of the income
spectrum received tax cuts (averaging $740) that
raised their after-tax incomes an average of 2.5%.
The top one per cent of households received
tax cuts in 2006 (averaging $44,200) that
increased their after-tax income by an average of
5.4%.
Households with incomes exceeding $1 million
received an average tax cut of $118,000 in 2006,
which represented an increase of 6.0% in their
after-tax income. [15]
Concluding
remarks Close scrutiny of the Pentagon
budget shows that, ever since the election of
Ronald Reagan as president in 1980, opponents of
social spending have successfully used military
spending as a regulatory mechanism to cut
non-military public spending, to reverse the New
Deal and other social safety net programs, and to
redistribute national/public resources in favor of
the wealthy.
Close examination of the
dynamics of redistributive militarism also helps
explain why powerful beneficiaries of the Pentagon
budget prefer war and military spending to peace
and non-military public spending: military
spending benefits the wealthy whereas the benefits
of non-military public spending would spread to
wider social strata. It further helps explain why
beneficiaries of war dividends frequently invent
new enemies and new “threats to our national
interests” in order to justify continued
escalation of military spending.
Viewed in
this light, militaristic tendencies to wage war
abroad can be seen largely as reflections of the
metaphorical domestic fights over allocation of
public finance at home, of a subtle or insidious
strategy to redistribute national resources from
the bottom to the top.
Despite the
critical role of redistributive militarism, or of
the Pentagon budget, as a major driving force to
war, most opponents of war have paid only scant
attention to this crucial force behind the recent
US wars of choice. The reason for this oversight
is probably due to the fact that most critics of
war continue to view US military force as simply
or primarily a means to achieve certain
imperialist ends, instead of having become an end
in itself. Yet, as the US military
establishment has grown in size, it has also
evolved in quality and character: it is no longer
simply a means but, perhaps more importantly, an
end in itself, an imperial power in its own right,
or to put it differently, it is a case of the tail
wagging the dog - a phenomenon that the late
president Eisenhower so presciently warned
against.
Accordingly, rising
militarization of US foreign policy in recent
years is driven not so much by some
general/abstract national interests, or by the
interests of Big Oil and other non-military
transnational corporations (as most traditional
theories of imperialism continue to argue), as it
is by powerful special interests that are vested
in the war industry and related war-induced
businesses that need an atmosphere of war and
militarism in order to justify their lion’s share
of the public money.
Preservation,
justification, and expansion of the
military-industrial colossus, especially of the
armaments industry and other Pentagon contractors,
have become critical big business objectives in
themselves. They have, indeed, become powerful
driving forces behind the new, parasitic US
military imperialism.
I call this new
imperialism parasitic because its military
adventures abroad are often prompted not so much
by a desire to expand the empire's wealth beyond
the existing levels, as did the imperial powers of
the past, but by a desire to appropriate the
lion's share of the existing wealth and treasure
for the military establishment, especially for the
war-profiteering contractors. In addition to being
parasitic, the new US military imperialism can
also be called dual imperialism because not only
does it exploit defenseless peoples and their
resources abroad but also the overwhelming
majority of US citizens and their resources at
home.
Notes 1. William D
Hartung, "Bush Military Budget Highest Since WW
II", Common Dreams (February 10, 2007). 2.
Ibid. 3. Robert Higgs, "The Defense Budget Is
Bigger Than You Think," antiwar.com (January 24,
2004). 4. Ibid. 5. Ismael Hossein-zadeh,
Why the US is Not Leaving
Iraq. 6. Bill Rigby, "Defense
stocks may jump higher with big profits," Reuters
(April 12, 2006). 7. The Center for Public
Integrity, "Outsourcing the Pentagon" (September
39, 2004). 8. Scott Shane and Ron Nixon, "In
Washington, Contractors Take On Biggest Role
Ever," The New York Times (February 2007, 4) 9.
Faiz Shakir et al, Center for American Progress
Action Fund, "The Progress Report" (February 6,
2007). 10. Robert Greenstein, "Despite the
rhetoric, budget would make nation's fiscal
problems worse and further widen inequality,"
Center for Budget and Policy Priorities (February
6, 2007). 11. Ibid. 12. Richard Du Boff,
"What Military Spending Really Costs," Challenge
32 (September/October 1989), pp 4-10. 13. Doug
Henwood, Left Business Observer, No 114 (December
31, 2006), p 4. 14. Congressional Budget
Office, Historical Effective Federal Tax Rates:
1979 to 2004, December 2006; as reported by Center
on Budget and Policy Priorities. 15. See Tax
Policy Center tables T06-0273 and T06-0279 at
www.taxpolicycenter.org.
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