Military Keynesianism Survives Sequestration

Published in Z Magazine, May 2013. In a story that shouldn’t surprise anyone familiar with business rule as usual in Washington, U.S. military contractors will suffer no great or particular loss from the federal austerity fiscal policy called sequestration. The Aerospace Industries Association (AIA)—the top lobbying and public relations arm of the nation’s high-tech corporate “defense” (military empire) contractors—was crying wolf when it claimed that the sequestration would be a deadly blow against its industry, which gets nearly $1 billion a day from U.S. taxpayers.

It is true that “defense” is included on an even basis in the across-the-board federal budget cuts mandated by the 2011 Budget Control Act—the $85 billion in automatic spending reductions that took effect on March 1, 2013, as a result of the government’s failure to make a “deficit reduction deal” at the beginning of the year. But sequester is no disaster for the giant corporate component of the military industrial complex (MIC) that outgoing President Dwight Eisenhower famously warned Americans about in 1960. 

This is for three basic reasons. First, the corporate warmasters’ many heavily “defense”-sponsored supporters in Congress (the “Hawks on the Hill,” led by Senator John McCain [R-AZ]) were determined to soften the sequester blow to the war industry by giving the Pentagon more flexibility than other federal departments will garner to adjust spending across its programs. At the end of March, President Barack Obama signed a bill granting that flexibility, which will be utilized to make sure that war contractors are not hurt. As new Secretary of Defense Chuck Hagel said during his confirmation hearing: “The continuing health of the [military-] industrial base will be a high priority.”

Pentagon Comptroller Robert Hale was more specific in a sequestration briefing. “I don’t anticipate that we will cancel many, if any, contracts…. I would like to say to reassure them [military firms],” Hale added, “that if you’ve a contract with us, we’re going to pay you.”

 Second, the Pentagon is well-positioned to absorb cuts thanks to the significant and disproportionate increase in U.S. military spending that occurred over the previous decade. That spending nearly doubled between 2001 and 2012, rising to a fifth of the federal budget and a remarkable 57 percent of federal discretionary spending. Domestic discretionary spending, by contrast, rose by only 8 percent during the same period, a telling disparity given the significant increases in joblessness and poverty that came with the Great Recession (National Priorities Project, “Sequestration, the Pentagon, and the States,” February 21, 2013). 

Along the way, the National Priorities Project notes that the Pentagon continues to “waste billions of [taxpayer] dollars developing and purchasing Cold War legacy weapons” (examples include the F-34 Fighter, the V-22 Osprey Aircraft, and the SSN-774 Virginia Attack Submarine) that bear little relation to real “national security” threats in the 21st century. As noted on the eve of the cuts last February, “the $46 billion cut that the Pentagon would suffer from sequestration is a drop in the bucket compared to its $400 billion F-35 joint strike fighter project, which has been plagued by cost overruns for practically meaningless improvements over existing aircraft” (“The Austerity v. Austerity Debate,”, February 27, 2013).

On a less spectacular and more comic level, leading defense budget analyst Ben Freeman of the Project on Government Oversight reports that the Pentagon “recently spent taxpayer money on an app that lets you know when it’s time for a coffee break and $1.5 million to develop its own brand of beef jerky.”

The Pentagon cuts are small in comparison to the massive amounts of taxpayer money defense contractors receive and store up through the Pentagon system. According to Freeman: “Every year for the last five years, the Pentagon has doled out at least $360 billion to contractors. In fact, every year since the war in Afghanistan began contractors have received more than half of the Pentagon’s total budget…contractors have received more taxpayer money than the Department of Defense’s civilian employees and nearly 1.4 million active duty military personnel combined….All that money has really added up. So much so that the Pentagon contractors are sitting on a backlog of contracts worth nearly as much as the entirety of Pentagon sequestration…. In other words, even if contractors absorbed all of the Pentagon sequestration cuts, they’d still be on track to receive more than $300 billion a year in new contracts, which is more than double what any other country in the world spends on its military” (Ben Freeman, “Despite Hype, Defense Industry Still Thriving After Sequestration,” Salon, March 12, 2013). 

Which brings us to the third reason for the MIC to stop crying sequester wolf. In fact, it’s civilian employees, not contractors, who are being significantly hurt by the cuts. Even as he has declared his reassurance of no lost contracts and profits to defense corporations, Comptroller Hale announced that the Pentagon would furlough most of its civilian workforce one day per week, without pay, for the rest of the fiscal year. The Pentagon has subsequently cut the originally projected number of furloughed days from 22 to 14, still significant amount of lost wages (amounting to about $2.5 billion) for nearly 800,000 workers.

Meanwhile, significant cuts are being inflexibly imposed on essential domestic social programs—no small problem in the U.S.—home to by far and away the most extreme inequality and the highest poverty rate among all rich nations. Millions of Americans struggle to find adequate shelter, health care, education, and food, not to mention minimally adequate employment chances. Their struggle has become considerably more difficult thanks to the slashing of government benefits and supports and to the depressive economic impact of cutting $85 billion in government spending. Since the fiscal year began last October, the one year cut is being pressed into just seven months, leading to cuts as high as 10 percent in unemployment checks. It appears that 70,000 pre-school children will be booted out of the federally funded Head Start in the name of sequester before the end of the current school year.

A Short History  

All of this is fairly predictable given the massive Pentagon System’s longstanding central role in the workings of the nation’s reigning wealth-concentrating profits system. One of the lessons of the Great Depression was that the U.S. “free enterprise system” could not survive without significant federal government spending. The question was what sort of spending would hold sway: expenditure on human and social welfare or on military empire? 

Guns won out over butter, on the whole, reflecting both the global ambitions of the United States post-WWII power elite and the related imperatives of domestic business class rule. As the U.S. economic elite determined, massive spending on military empire, war, and the preparation for war provided a useful way for government to stimulate demand and sustain the domestic corporate political economy without fueling threats to business class power and the concentration of wealth in the hands of the few in the way that “progressive civilian spending” (Edward S. Herman’s useful phrase) would. Business Week explained this elite preference for war over welfare when it came to “Keynesian” stimulus in February 1949.  

The magazine noted that: “there’s a tremendous social and economic difference between welfare pump-priming and military pump-priming…. Military spending doesn’t really alter the structure of the economy. It goes through the regular channels. As far as a businessman is concerned, a munitions order from the government is much like an order from a private customer. But the kind of welfare and public works spending that [liberals and leftists favor]…does alter the economy. It makes new channels of its own. It creates new institutions. It redistributes wealth.. It changes the whole economic pattern.” (“From Cold War to Cold Peace?” Business Week, February 12, 1949, quoted in Noam Chomsky, Turning the Tide: U.S. Intervention in Central America and the Struggle for Peace, 1985, 209-2010.)

 In the early 1990s, the leading critic of U.S. imperialism, Noam Chomsky, elaborated on Business Week’s post-WWII reflections in explaining why there would be no “peace dividend” (no major shift of resources from military to domestic social spending) after the demise of the official Cold War enemy: “Business leaders recognized that social spending could stimulate the economy, but much preferred the military Keynesian alternative—for reasons having to do with privilege and power….The Pentagon system[’s]…form of industrial policy does not have the undesirable side-effects of social spending directed at human needs. Apart from unwelcome redistributive effects, the latter policies tend to interfere with managerial prerogatives; useful production may undercut private gain, while state-subsidized waste production (arms, Man-on-the-Moon extravaganzas, etc.) is a gift to the owners and managers, to whom any marketable spin-offs will be promptly delivered. Social spending may also arouse public interest and participation, thus enhancing the threat of democracy; the public cares about hospitals, roads, neighborhoods, but has no opinions about the choice of missile and high-tech fighter planes. The defects of social spending do not taint the military-Keynesian alternative” (Noam Chomsky, World Orders Old and New, 1994, 100-101).

It was with these sorts of considerations in mind, no doubt, that former and future General Electric (GE) President and sitting War Production Board executive Charles Edward Wilson warned in 1944 about what later became known as “the Vietnam syndrome”—the reluctance of ordinary citizens to support the open-ended commitment of American troops and resources to military conflict abroad. “The revulsion against war not too long hence,” Wilson cautioned fellow U.S. industrialists and policymakers, “will be an almost insuperable obstacle for us to overcome. For that reason, I am convinced that we must now begin to set the machinery in motion for a permanent war economy” (quoted in Joel Bleifuss, “Leader of the PAC,” In These Times, December 16-23, 1986, 4). The Cold War provided the justification for the continuation of such an economy for more than four decades. 

The American power elite’s fondness for military over social Keynesianism—and for a permanent war political economy over a permanent progressive justice and anti-poverty economy—survived the struggle between Soviet “socialism” and American “capitalism,” as predicted by those who understood the state-capitalist functions of the Cold War for the investor class. Thus, it was that military spending remained at colossal Cold War levels during the “interwar period” between the decline of the Soviet system and 9/11/2001.  

Then came the jetliner attacks, predictable blowback from imperial U.S. policy in the oil-rich Middle East. The stunning al Qaeda assault served as the “the New Pearl Harbor” that Donald Rumsfeld, Dick Cheney, Paul Wolfowitz and other members of the ultra-imperialist Project for a New American Century thought would be necessary for military spending to reach the unprecedented levels they saw as required to extend U.S. global dominance, beginning with major new invasions of the oil-rich Middle East. 

No Peace Dividend

Defense” spending has increased significantly under the supposed “peace” president Barack Obama, an empire-vetted militarist who advised and agreed before the 2008 election that (in the words of researchers at the leading financial bailout recipient firm Morgan Stanley) “there is no peace dividend” (Heidi Wood et al., “Early Thoughts on Obama and Defense,” Morgan Stanley Research, Aerospace and Defense, November 5, 2008). The government could have attained the $4 trillion in spending cuts over 10 years that Obama proposed early in the 2011 “debt-ceiling crisis” simply by returning to the enormous military budgets of the Clinton era. As Ronald Reagan’s former Assistant Secretary of Defense Lawrence Korb noted in early 2011, American military spending, adjusted for inflation, was “higher than at any time since the end of World War II. Over the past decade,” Korb acknowledged, “the U.S. share of global military spending has risen from one-third to one-half. The United States now spends six times as much as China, the country with the next biggest budget” (CNNMoney, January 5, 2011).

The title of the essay in which Korb made these scandalous observations was “How to Cut $1 Trillion From the Pentagon.” Such a move has been just as completely off the table of serious policy discussion in the Empire-rebranding Age of Obama as it was during the long national Bush-Cheney nightmare. As Edward S. Herman observes, the newly inaugurated Obama: “…soon found that that political success demanded killing foreigners; that budget enlargement for killing was easy, but spending for progressive civilian needs was difficult and would anger powerful people. He quickly adapted to being a warrior president, his seemingly most proud accomplishment being the killing of bin-Laden…. Obama had played all the war cards. He has lauded the Vietnam War as a noble enterprise…. Like Bush he loves to speak to military cadres where he can draw resounding applause with patriotic and belligerent rhetoric” (Edward S. Herman, “Support Our Troops, Our War, and Our War Criminals,” Z Magazine, April 2013). 

An Open-Ended Entitlement 

Claiming to be nervous about “the business impact of the winding down of wars in Iraq and Afghanistan” (the Wall Street Journal) and Defense Secretary Robert Gates’s call for modest reductions in “security spending,” the AIA (anchored by war masters Boeing, Lockheed Martin, and Raytheon) launched a major lobbying push to defend their interests on Capitol Hill as the debt-ceiling crisis that brought us the sequester heated up in the summer of 2011 (Nathan Hodge, “Defense Industry Fears More Budget Cuts,” Wall Street Journal, July 14, 2011). In reality, the high-tech “defense” firms have had little to fear in Washington, where the Pentagon never has to worry about fiscal solvency even as Wall Street interests claim regularly and falsely that Social Security is nearing bankruptcy and thus requires privatization. As Herman wryly observed in June 2009: “The Pentagon has regular gigantic overruns in its payments for weapons systems and fraud and waste are endemic. But the Pentagon is never threatened with ‘insolvency.’ Its overruns and waste are simply passed on to taxpayers. The supine media, while occasionally chiding the Pentagon for, say, ‘running almost $300 billion over estimates and averaging 22 months behind delivery’ never talk about any crisis in the funding of overkill, military boondoggles, and waste.… We know that in the real world the taxpayer funds the Pentagon on an open-ended basis without any trust funds or limits beyond what logrolling can produce. After all, it is protecting our ‘national security,’ using the phrase with its usual infinite elasticity to cover anything the Pentagon, its contractors, their lobbyists, and the congressional servants of the military-industrial complex want.” (Edward S. Herman, “John Yoo, Social Security, and Korean Threat,” Z Magazine, June 2009.) 

The military system enjoys an open-ended entitlement to tap the treasury of a government that has spent decades raiding the Social Security trust fund to offset deficits caused by the war budget and tax cuts and loopholes for the rich (Jack Rasmus, “Budgets, Taxes, and Classes in America,” Z Magazine, June 2011). 

War is a Racket 

War is a racket,” wrote Smedley Butler, a decorated Marine general who recalled functioning in essence as “a high class muscle man for Big Business, for Wall Street and the bankers” during numerous early 20th century deployments in Central America and the Caribbean. The militarism that he coordinated enriched a select few wealthy Americans, Butler reflected, not the mostly working class soldiers on the front lines. “How many of the war millionaires shouldered a rifle. How many of them dug a trench?” 

Butler’s reflections have, if anything, grown in relevance since World War II when the U.S. became home to the greatest empire the world has ever seen—and to a vast military-industrial complex whose direct prices (including mass death and injury in a long line of neocolonial wars of invasion and occupation from Korea through Vietnam, Iraq, and Afghanistan) and more indirect costs (including social welfare opportunity costs) have been borne by American society as a whole (not to mention the many millions of non-American others killed, injured and displaced by the U.S. military and its military client states) as the benefits have flowed especially to wealthy Americans. Today, as during the Cold War and before, Ralph Nader notes, war and the apparently permanent preparation for war is a source of corporate mega-profits as it provides a deceptive cloak of national unity behind which elites concentrate wealth and power, shaming those who question that upward redistribution as unpatriotic carpers seeking to “divide rather unite America” (Ralph Nader, The Seventeen Solutions). 

Military Keynesian remains intact while the business class’s campaign to dismantle what’s left of the welfare state takes another step forward in poverty- and prison-ridden America. Such are the “perverted priorities” (Martin Luther King Jr.’s phrase) of policymakers in the U.S., the “beacon to the world of the way life should be,” to quote onetime U.S. Senator Kay Bailey Hutchinson (R-TX), reflecting on why George W. Bush should be allowed to invade Iraq if he wanted to. Z

Paul Street is an author and journalist in Iowa City, Iowa. His next book, They Rule: The 1% v. Democracy, is available fall 2013.








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By | 2013-05-14T11:41:24+00:00 May 14th, 2013|Articles|