We Are Poor, Part II

PAUL OLSON
UNL EMERITUS PROFESSOR

We now have a $14 trillion debt, over half of which derives from military expenditures. This year we have a budget proposal of over $1 trillion for military and military-related costs ($700 billion for the Pentagon itself). The U.S. together with our allies—Britain and the European Union, India, Israel, Egypt, South Korea and our cohorts in the war on al Qaida—account for 75 percent of the world’s military spending. Our closest ‘non-ally,’ China, spends barely a sixth of what we spend.

All this money lavished on the military… and for what? Our global military ventures sow hatred and vengeance, and we’re not even winning on the field of battle. 

The ‘wars’ we’re fighting are not the front-line wars one wins. Our so-called ‘enemies’ are informal militias that live ‘underground’ and form, dissolve and reform overnight. These adversaries—in Asia, the Middle East, Africa and parts of South America—are the offspring of centuries of grievances against the West or ‘Christianity’ or British/American colonialism that exploited them grievously for Western benefit. Such resentments are not controlled by fear or trillion-dollar budgets—even granting the military pacification skills of General Petraeus and Secretary Gates.

We could of course solve the problem of our budget deficit by resetting our marginal tax rates, which—in the prosperous 1940s and ’50s—were two to three times higher. But, as I see it, the multinational rich who dominate our present tax policy will not allow this. They are not patriots. For all their flag-waving, they despise paying taxes to the country or loving the countrymen and women who have enabled their prosperity.

America’s military budget now accounts for only 4.7 percent of the Gross Domestic Product. Yet it comprises over half of the discretionary federal budget because we tax so little. The Republicans and many Democrats claim that we cannot tolerate more debt than the $14 trillion sovereign debt we now carry. But rather than raise taxes to increase government revenues, like Ronald Reagan, these ‘deficit hawks’ wish to cut social and educational programs (perhaps in the hope of making the poor, the sick, and the undereducated disappear altogether). Morally, we are ourselves too impoverished to help the poor to a decent life.

Even President Obama has bought into this logic in his 2011 budget. His terminated programs include the following: Reintegration of Ex-Offenders; YouthBuild; Green Jobs Innovation Fund; Career Pathways Innovation Fund; National Health Service Corps; Family Planning (Title X); Teen Pregnancy Prevention Grants; Mentoring Children of Prisoners; Even Start; Striving Readers; High School Graduation Initiative; Federal Supplemental Educational Opportunity Grants (higher ed financial assistance); LEAP program (for low-income college students).

The Obama budget’s drastically cut programs include: $1 billion from Head Start (15 percent); $1.4 billion from job training; Community Health Centers (46 percent cut); substance abuse treatment ($200 million cut); Community Services Block Grants (44 percent cut); Low Income Home Energy Assistance (66 percent cut); FEMA Emergency Food and Shelter (50 percent cut); Title I education for low-income students ($693.5 million); IDEA special education ($560 million); Commodity Supplemental Food Program (11.4 percent cut); Community Development Fund ($2.95 billion, 66.3 percent cut); project-based rental assistance ($715.5 million, or 8.4 percent cut); Public Housing Capital Fund ($1.07 billion, 42 percent cut); Housing for the Elderly ($551 million, or 67 percent cut); Housing for Persons with Disabilities ($210 million, 70 percent cut).

In addition, the House Republicans would cut ten percent from the Women, Infants and Children (WIC) program that feeds impoverished young mothers and their children.

Recently, Senator Charles Schumer (D-NY) wisely stated that Congress’s budget cutting had to move from categorical social programs to military spending—move from the discretionary anthill to the discretionary mountain. Tea Party Senator Rand Paul (R-KY) has said the same thing. But establishment Democrats, Independents and Republicans have set the military budget off limits. They appear captive to the belief that security is synonymous with military spending. Inwardly, we are poor indeed.

Alternatively, Nebraskans for Peace has argued that—even with insanely low taxes—we need not destroy our support for the poor and middle classes, for education, for green economic or for health care. We can cut the Pentagon budget by half ($350 billion):

  1. We could close one third of our bases in Europe and Asia and save about $9 billion (National Commission on Fiscal Responsibility and Reform), or we could cut twice that many, leave Europe altogether, and save about $12-15 billion. We have bases in Europe and Japan dating back to World War II that have no conceivable relation to a post-Cold War world;
  2. We could end the wars in Afghanistan and Iraq; 64 percent (some polls say 75 percent) of Americans now oppose these wars that are to be paid for by a $171 billion dollar budget request in 2011 (Congressional Research Service). The Harvard Political Review says that the Afghan war alone is costing more than $100 billion;
  3. We could terminate all unnecessary weapons systems still being supported: Ballistic Missile Defense, the Littoral Combat Ship, the V-22 Osprey, the F-35, the Global Information Grid, the Ford Class Carrier, the proposed Future Combat systems that do not work, the Mine Resistant Vehicles and other systems. This would save $50 billion (RAND consultant John Arquilla);
  4. We could request a return of all military funds that the GAO cannot account for; only six of 33 Dept. of Defense reporting entities received unqualified audited opinions. We estimate that each of the 27 programs that are not audited could be cut by at least a billion dollars: $27 billion dollars (based on UNL Accounting Professor Linda Ruchala estimates);
  5. We could cut aid to Egypt, Israel, the Saudis and other Middle Eastern countries—aid that only says to those countries, “Let’s see you and him fight.” $6 billion savings (Ron Paul);
  6.  We could implement Secretary Gates’ $100 billion five-year savings plan: $20 billion (Gates);
  7. We could include military health care in the national health care system: $50 billion (based on National Commission on Fiscal Responsibility recommendations);
  8. We could cut the U.S. nuclear arsenal to 500 warheads and save $87 billion over the next 10 years, $8.7 billion in the next budget (Cato Institute);
  9. We could reduce the size of the Army to 360,000 and the Marine Corps to 145,000, saving $300 billion over the next decade: 30 billion for one year (Cato);
  10. We could reduce military intelligence spending by $110 billion over the next ten years: $11 billion in the next year (Cato).

These savings total $390 billion dollars. Some might take more than a year to phase in, but most could work quickly and help us save our civil society. They would eliminate the need to cut Head Start, WIC, and heating help to old folks. They would leave us stronger. They would make us all less poor…

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Comments

April 5th 2011

Joe - I quit reading at "We could of course solve the problem of our budget deficit by resetting our marginal tax rates, which—in the prosperous 1940s and ’50s—were two to three times higher." Taxes paid is a product of TWO numbers: taxable income and tax rates. While this hack professor is correct about tax rates, he apparently never bothered with facts on changes to how taxable income is calculated. Because so many deductions were available back then, the effective rates paid as it related to gross income are about the same. In fact, these massive amounts of deductions are what led to the implementation of the alternative minimum tax. And if you eliminated 100% of our military spending, we would STILL be in a deficit situation. Thus, Paul is either an ignorant professor (I doubt it) or he is more interested in lying and twisting facts to serve his own personal views. Either way, makes me saddened that the university I got my Masters on Accouting from hires hacks like this who throw out objective thought.

April 7th 2011

Joe 2 - So do you have a counter to his spending proposals that would lower our expenditures by a not insignificant amount that doesn't equate to "it's not going to immediately solve the problem so it's stupid." Because that's a pretty terrible argument, regardless of factual inaccuracies about income tax.

June 3rd 2011

bham - Hi Joe -- The professor's main point was not about marginal tax rates. It was about how much we are willing to spend on a military that makes us less rather than more secure. Raising the question of whether marginal tax rates are the same as effective tax rates doesn't change this fundamental point--or answer it. But you want to talk about taxes, so let's take a look. First of all, the professor made it clear that he was talking about marginal tax rates, so there is no question of lying. The marginal tax rates were exactly where he said they were when he said they were. Your point is that marginal tax rates are not the same as the effective tax burden. Fair enough. But your analysis is also limited. You consider only the income tax rates and taxable income. The total tax burden includes a wider range of taxes. Now there are various ways of calculating the overall tax burden, but all of the ones I've seen that are all comprehensive show that we are at a historical low. One measure is to look at a variety of taxes (personal, corporate, excise, social security) as a percentage of GDP. You have to go back to 1950 to get a rate that is similar to today's (http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=205). This is how much we all paid. Not who pays. Another way to look at this issue is to ask about the _fairness_ of the tax system. Does the tax system ask the most from those most able to pay? In other words--How progressive is the tax system? Thomas Piketty and Emmanuel Saez have published and interesting and careful analysis of this issue (Piketty & Saez (2007) How Progressive is the U.S. Federal Tax System? A Historical and International Perspective, Journal of Economic Perspectives, 21(1),3-24). They show that "the progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s." This is due to changes in both various tax rates and the way in which top earners are compensated. So Joe, it seems that the professor was right after all. Maybe you should keep reading. And keep thinking.

October 4th 2011

Luke - This piece has some very good data. I think it's time to consider candidates who are actually serious about cutting the military and ending these disastrous wars around the globe. Obama is clearly not interested. Most recently, my tax dollars went to purchase bombs to drop on Libya without Obama even consulting my representatives, and just the other day he ordered the assassination of an American citizen without first filing charges or even mentioning due process requirements. Ron Paul is the only politician courageous enough to say exactly what our wars do: "sow hatred and vengeance." He is the only one that is serious about ending these wars. No other candidate understands the history of our intervention around the globe. No other candidate understands that when Obama uses drones to kill people (often civilians) in Yemen and Pakistan, it breeds resentment in the middle east. I'm tired of the Republicans (Bush) and Dems (Obama) waging unconstitutional wars around the globe in our name. I'm serious about peace. I'm voting for Ron Paul.