Tag Archives: military spending

How the bloated miltary budget is a national security threat

The American military budget is massive.

At $610 billion, it dwarfs the combined military budgets of China, Russia, Saudi Arabia, France, the UK, India and Germany (see chart below). Put another way, one third of all military spending the world comes from the United States. The problem is, however, that the American military budget may be crowding out other crucial investments.

As the era of American hegemony winds down, it’s more important than ever for America to be able to demonstrate soft power. That means first, an American model that works, for other countries to emulate. But further, it means a highly educated population, long-term investment in infrastructure, adequate healthcare, an society based, above all else, on opportunity. However, it’s likely that the military budget precludes these important services.

The most important cost of our bloated military budget is investment in other important government functions. As the chart below from CBO shows, defense spending has historically consumed more than half of the entire U.S. government discretionary budget (spending on veterans eats up mandatory spending as well). In 2014, discretionary defense spending was double Medicaid spending, and about equal to Medicare spending.

Given that the U.S. is already a relatively low-spending country, the military only further diminishes our meager  safety net.

The chart below shows that not only does the U.S. spend comparatively less of its GDP on government than other developed countries, military spending (the white/grey bar) takes up far more of it. That means America spends less on general public services, environmental protection and education than otherwise. But these services are key to America’s ability to remain a global leader. Further, it means that American women are more likely to die in childbirth than women in China and our infrastructure pulls down global competitiveness. America spends far less than other rich countries on foreign aid, and dedicatesonly 1 billion dollars, a sliver of its budget to international affairs. In 2011, the Brookings Institution worried, “the United States is following an unfortunate path that other big countries, such as the former Soviet Union, have already taken in history, wasting too many resources and too much national wealth on military expansion, wars, and foreign interference.”

The effect of our outsized budget is felt in other ways. Surplus goods are often sent to local police offices, who end up with grenade launchers, weaponized aircraft and “tank-like armoured vehicles.” Concomitantly, police killings have increased (according to the best data available) and the police have begun to seem like an occupying force. This has a profound effect on trust in civic institutions and the police. As trust in police officers decreases, they find it harder to do their job and the community grows even more skeptical. There’s also the likely possibility that the availability of military force makes it more likely, by making non-military means less attractive.

The current conception of national security is far too limited. As violent deaths from war and terrorism decline, the greater threat to Americans is their failing infrastructure, costly healthcare system and incoherent environmental policy. The Obama White House has warned on numerous occasions that climate change and shoddy infrastructure are a deep threat to American national security. In 2007 a report by numerous high-ranking military leadersfound, “Global climate change presents a serious national security threat which could impact Americans at home, impact United States military operations and heighten global tensions.” The Pentagon has been worried that climate change is a national security threat since even earlier, releasing a report in 2003 discussing the implications of global warming. The Department of Homeland Security has consistently warned that aging infrastructure is a national security risk. Worryingly, however, the United States has devoted increasingly less money to infrastructure, and in the future, this will only grow worse. Josh Bivens of EPI finds that every proposed budget in 2013 except the Progressive Caucus budget, would dramatically decrease public investment as a share of GDP.

In addition, our ability to lead by example is threatened by poverty, homeless and rampant inequality. A recent survey found that internally, the view that America’s economy is the leading one has declined dramatically.

The American model looks increasingly unappealing to emerging economies, who have seen the American middle class become less vibrant and more straddled with debt. The New York Times recently reported that the American middle class was no longer the world’s richest.  Matt Bruenig notes thatfurther down the income distribution, America does even worse: the poorest 5th of Americans have less disposable income than those in 14 other countries. Finally, without a highly educated population and an innovative economy, America will no longer be able to exert the soft-power necessary as our hard-power advantage declines. Even Americans are increasingly skeptical of the American model, with a 2012 survey finding that 63% believe the American economic model is broken.

Our bloated defense budget is taking away money that could go to more important things. As I’ve noted, just two years funding for the massive, $1.5 trillion F-35 fighter jet could fund free community college for all students for a decade. Americans need to realize that today, the larger threat they face is their own fear leading them to underinvest in vital services. As Franklin Delano Roosevelt famously warned, “the only thing we have to fear is… fear itself.”

This piece originally appeared on Salon. 

How America can fix the racial wealth gap

One of the most persistent but unaddressed problems in the United States is our massive racial wealth gap. Wealth provides an important cushion from the threat of unemployment, medical emergency or other unforeseen events. Wealth can also help pay for college, the start of a new business or the purchase of a first home. However, most Americans struggle with debt. A recent Federal Reserve Report finds that of Americans who had savings before 2008, 57 percent reported using up some or all of their savings in the aftermath of the recession. However, wealth and debt are not distributed equally (see chart).

The racial wealth gap is caused by the fact that wealth is passed from generation. As Gregory Clark notes in his recent book, “The Son Also Rises, the residual effects of wealth remain for 10-to-15 generations. Given that most Americans are only four generations removed from slavery and one generation away from segregated neighborhoods, restrictive covenants and all white colleges, the only truly surprising fact is that the racial wealth gap is not larger. America is also uniquely susceptible to persistent wealth gaps because of our low inheritance, estate and capital gains taxes and the fact that what minimal taxes exist our fraught with loopholes. In 2010, the richest 400 households took home 16 percent of all capital gains (a sweet $300 million each), but paid the same tax rate as a worker making $80,000. At the same time, a loophole in the tax code has allowed the wealthiest to avoid $100 billion  in estate and gift taxes since 2000. On the other side, our public school system is profoundly discriminatoryour neighborhoods deeply segregated and access to credit is racially discriminatory. As Thomas Piketty recently demonstrated, “In terms of total amounts involved, inheritance has thus nearly regained the importance it had for nineteenth century cohorts” (see chart).

The biggest myth of the racial wealth gap that must be demolished is that education or rising incomes can eradicate it. As Matt Bruenig has persuasively shown, this argument is laughably absurd.  College educated Blacks have less wealth than white college drop-outs (see chart).

Bruenig also shows that high income Blacks and Hispanics also have less wealth than whites (see chart).

Between 2007 and 2010, all racial groups lost large amounts of wealth. However, the wealth reduction fell disproportionately on Hispanics and blacks, who saw a 44 percent and 31 percent reduction in wealth (compared to an 11 percent drop for whites). This was due to blacks and Latinos disproportionately receiving subprime loans, both because of outright lending discrimination and housing segregation.A recent research brief by the Institution on Assets and Social Policy finds that the wealth gap between white families and African Americans has tripled between 1984 and 2009. They find five main factors responsible for driving the gap, which together explain 66 percent of the growth in inequality. The factors, in order of importance, are number of years of homeownership, household income, unemployment, college education and financial support or inheritance.

The most frustrating problem with the racial wealth gap is that it is not abating. While half of whites say that “a lot” of progress has been made towards Martin Luther King Jr.’s dream,  the data show that the racial wealth gap has only increasing since 1983 (see chart).

What is to be done?

There are several important public policy changes that can alleviate the racial wealth gap. The first is to prevent the further accumulation of debt. While debt is often seen as a problem attributable to individuals, the academic literature is clear that broader economic forces are at largely responsible for the run-up of debt. Credit card debt is particularly harmful for people of color who often face discriminatory lending practices. A recent study of credit card debt finds that people of color pay a far higher IPR on average than white borrowers. The CARD act has already been a boon to consumers, but underlying drivers of debt, such as rising inequalityretirement insecurity and lack of health insurance must also be addressed.

Higher education debt must also be addressed. Research from Demos finds that if “current borrowing patterns continue, student debt levels will reach $2 trillion sometime around 2022.” However, student debt is not distributed equally, but rather falling primarily on students of color and low-income students. That’s because in our age of austerity, governments are spending less money on higher education, shifting the burden of paying for college onto students. Federal and state governments need to step up and fund an investment in the next generation.

On the other side, however, we must also foster wealth-building initiatives. Historically, homeownership has been a pathway to the middle class, but deep residential segregation means that Blacks and Hispanics often own homes that are far less valuable than white homes (see Table 3). Further, in the wake of the crisis many banks are buying up foreclosed houses and renting them out. That means income for people of color is no longer becoming wealth for people of color, but rather wealth for rich bankers.  One solution would be a first-time homeowners tax credit that is weighted to benefit low and moderate income households, rather than the mortgage interest deduction, which favors the wealthy. FICO credit scores should replaced with more reliable credit measurements.  But the ideal way to reduce wealth inequality, not only between people of color and whites, but also between the richest .1 percent and the rest of us, is a baby bond.

A baby bond is an endowment given to Americans at birth and maintained by the federal government until they are 18. The bond functions in a similar way to Social Security and can be sued to pay for college, buy a house or start a business. Hillary Clinton, in fact,briefly floated the possibility of a baby bond during her 2008 campaign, although the modest $5,000 sum she proposed is certainly smaller than ideal. Britain brieflyexperimented with a baby bond proposal, although it later became the victim of Tory Austerity.  Dr. Darrick Hamilton and William Darity Jr., leading proponents of  a baby bond, propose a progressive bond that caps at $50,000 for the lowest wealth quartile bond could close the racial wealth gap in three generations.  Their proposal would be given to three-quarters of Americans (based on wealth eligibility). They estimate that such a program would cost $60 billion a year, about one-tenth of the 2014 defense budget.

The baby bond need not increase the deficit. A recent CBO report finds that right now, tax credits primarily benefit the wealthiest, at a cost of nearly $1 trillion a year. This money could easily fund an extensive baby bond program that would, over time, eliminate the racial wealth gap. Another option would be to restore progressivity to our tax system. Because the baby bond program would not be explicitly targeted at people of color but rather would benefit most Americans, it could easily win broad support (much as Social Security is currently untouchable). Any presidential candidate should make the baby bond a central plank of their 2016 if they want to seriously address the problem of wealth inequality. Without such a proposal, wealth, and therefore political power will become increasingly concentrated in the hands of a small elite. It may already be too late.

This piece originally appeared on Salon