| Chapter Twenty-Six of Pax Americana: The Military Industrial Complex and the War On Terror by Danny Quintana |
| Why Defense Spending Will Not Save the Economy "Leave no defense contractor behind." (regarding Bush's military buildup after the 9/11 attack). Paul Krugman "No generation can contract debts greater than may be paid during the course of its own existence," Thomas Jefferson |
Clearly defense spending has been used by American politicians for a variety of purposes, from pork barrel politics, to priming the economic
pump, to actual defense of our great nation. This time, the tired policy of throwing money at the defense spending coalition complete with junk
programs, like the missile defense system, to placate campaign contributors and stimulate the economy will not work. There are several
reasons this policy of wasteful defense expenditures have made matters worse:
The Russians have refused to play arms race. Having given up in their quest to compete with the Americans over who gets to screw the third
world, our politicians can no longer justify bloated defense budgets. Russia is consumed with internal problems and is too busy trying to
create a market economy to waste money on a new arms race. With no “evil empire” gone are the Reagan/Bush I days of a 600- ship
navy, B-1 and B-2 bombers, and a new weapon system for every congressional district, times are tight on the Belt Way.
Consumer spending makes up two-thirds of the economy, but increases accounted for an astounding 85 percent of the growth in the gross
domestic product last year. And it's fueled by unsustainable efforts by most families. Consumer debt, from credit cards to home mortgages,
now totals about 85 percent of personal income -- with installment loans accounting for $1.4 trillion. Personal savings actually turned negative
in the second half of 1998. Families have kept their heads above water by working more hours -- indeed, middle income couples with children
are putting in an average of six full-time weeks more each year than a decade ago. 1 The plain fact of life is most Americans are broke.
However, with consumer debt at an all time high, a new and improved missile defense system will not solve a basic economic fact. Most
Americans are a paycheck away from being broke most of the time. According to the Administrative Office of the U.S. Courts, more than 1.5
million non-business, or personal, bankruptcies were filed in fiscal year 2002 — up 7.8 percent from fiscal year 2001.2 The fact is American
consumer debt has been climbing faster than personal incomes and shows no signs of abating. Personal bankruptcies hit an all-time high in
2005, according to Lundquist Consulting, Inc., a bankruptcy analysis firm based in Middlesex, New York. Although spurred by a new anti-
debtor law going into effect late last year, more than 2 million Americans sought debt relief from Chapter 7 and Chapter 13 bankruptcy. U.S.
consumer debt has almost doubled to $2.16 trillion as of October from about $1.3 trillion in 1998, according to the
Federal Reserve. 3
pump, to actual defense of our great nation. This time, the tired policy of throwing money at the defense spending coalition complete with junk
programs, like the missile defense system, to placate campaign contributors and stimulate the economy will not work. There are several
reasons this policy of wasteful defense expenditures have made matters worse:
The Russians have refused to play arms race. Having given up in their quest to compete with the Americans over who gets to screw the third
world, our politicians can no longer justify bloated defense budgets. Russia is consumed with internal problems and is too busy trying to
create a market economy to waste money on a new arms race. With no “evil empire” gone are the Reagan/Bush I days of a 600- ship
navy, B-1 and B-2 bombers, and a new weapon system for every congressional district, times are tight on the Belt Way.
Consumer spending makes up two-thirds of the economy, but increases accounted for an astounding 85 percent of the growth in the gross
domestic product last year. And it's fueled by unsustainable efforts by most families. Consumer debt, from credit cards to home mortgages,
now totals about 85 percent of personal income -- with installment loans accounting for $1.4 trillion. Personal savings actually turned negative
in the second half of 1998. Families have kept their heads above water by working more hours -- indeed, middle income couples with children
are putting in an average of six full-time weeks more each year than a decade ago. 1 The plain fact of life is most Americans are broke.
However, with consumer debt at an all time high, a new and improved missile defense system will not solve a basic economic fact. Most
Americans are a paycheck away from being broke most of the time. According to the Administrative Office of the U.S. Courts, more than 1.5
million non-business, or personal, bankruptcies were filed in fiscal year 2002 — up 7.8 percent from fiscal year 2001.2 The fact is American
consumer debt has been climbing faster than personal incomes and shows no signs of abating. Personal bankruptcies hit an all-time high in
2005, according to Lundquist Consulting, Inc., a bankruptcy analysis firm based in Middlesex, New York. Although spurred by a new anti-
debtor law going into effect late last year, more than 2 million Americans sought debt relief from Chapter 7 and Chapter 13 bankruptcy. U.S.
consumer debt has almost doubled to $2.16 trillion as of October from about $1.3 trillion in 1998, according to the
Federal Reserve. 3
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Since the public does not have the money to spend and with the huge debts they are burdened with, how does spending Billions, not millions,
on missile defense solve this problem? It makes matters considerably worse. The Republicans and Democrats have been running a budget
deficit that is dangerous. Every Congressional district received funding for their pet defense project, military base and our troops now
stranded in Iraq. But this massive defense buildup has converted America into the largest debtor nation in human history. Defense spending
has been an economic disaster unless you owned stock in the various companies that sold goods or services to the Department of Defense,
the Veterans Administration, the Department of Energy, Homeland Security and every other agency that is involved in "national security".
on missile defense solve this problem? It makes matters considerably worse. The Republicans and Democrats have been running a budget
deficit that is dangerous. Every Congressional district received funding for their pet defense project, military base and our troops now
stranded in Iraq. But this massive defense buildup has converted America into the largest debtor nation in human history. Defense spending
has been an economic disaster unless you owned stock in the various companies that sold goods or services to the Department of Defense,
the Veterans Administration, the Department of Energy, Homeland Security and every other agency that is involved in "national security".
The stock market is a leading economy indicator. High volatility usually precedes a major economic crisis. These last three years have been
some of the most volatile markets in history. No sooner does the public’s money enter the markets then they dive down and wipe out the
investment. The American public has lost their confidence in public companies. And with good reason, according to the Bankruptcydata.com
U.S. public companies broke the record for bankruptcies in 2002, with 186 public companies with $368 billion in assets filing for bankruptcy.
Among the top bankruptcies in 2002 were five of the 10 largest bankruptcies ever, including WorldCom Inc., Conseco Inc., Global Crossing
Ltd., Adelphia Communications Corp. and UAL Corp. All of those companies except UAL Corp. filed for bankruptcy due to accounting
irregularities. Kmart Corp. had $14.6 billion in assets when it filed for bankruptcy in January 2002, the biggest retail bankruptcy in history. 4 If
you can't trust the numbers from the financial data reported to the public, then you are not investing, you are speculating and gambling. This
increase in stock price is not supported by the earnings of the companies. Stocks go up based on two very important factors: companies are
increasing their revenue and increasing their market share. Most earnings continue to disappoint in most sectors of the economy. Market
share cannot increase since virtually every market out there is oversold, oversupplied and over capacity for production is rampant. Like 1928
right before the crash, the Dow Jones Industrial Average is at an all time high. The question is when, not if, the market will crash.
some of the most volatile markets in history. No sooner does the public’s money enter the markets then they dive down and wipe out the
investment. The American public has lost their confidence in public companies. And with good reason, according to the Bankruptcydata.com
U.S. public companies broke the record for bankruptcies in 2002, with 186 public companies with $368 billion in assets filing for bankruptcy.
Among the top bankruptcies in 2002 were five of the 10 largest bankruptcies ever, including WorldCom Inc., Conseco Inc., Global Crossing
Ltd., Adelphia Communications Corp. and UAL Corp. All of those companies except UAL Corp. filed for bankruptcy due to accounting
irregularities. Kmart Corp. had $14.6 billion in assets when it filed for bankruptcy in January 2002, the biggest retail bankruptcy in history. 4 If
you can't trust the numbers from the financial data reported to the public, then you are not investing, you are speculating and gambling. This
increase in stock price is not supported by the earnings of the companies. Stocks go up based on two very important factors: companies are
increasing their revenue and increasing their market share. Most earnings continue to disappoint in most sectors of the economy. Market
share cannot increase since virtually every market out there is oversold, oversupplied and over capacity for production is rampant. Like 1928
right before the crash, the Dow Jones Industrial Average is at an all time high. The question is when, not if, the market will crash.
There are plenty of new cars, computers, clothes and all of the trapping of consumer wealth. But the consumers are not buying in record
quantities because one, they don’t have lots of extra cash and two they don’t need the products being sold. Thus car sales are down,
computer sales have slowed and even clothing retailers like Gap are having a hard time with excess inventory and capacity. Even with zero
percent financing, the American auto industry is not going to recover. If anything a new threat is rising called deflation. Actual prices are
declining in several sectors of the economy at an alarming rate. According to the Economist magazine:
quantities because one, they don’t have lots of extra cash and two they don’t need the products being sold. Thus car sales are down,
computer sales have slowed and even clothing retailers like Gap are having a hard time with excess inventory and capacity. Even with zero
percent financing, the American auto industry is not going to recover. If anything a new threat is rising called deflation. Actual prices are
declining in several sectors of the economy at an alarming rate. According to the Economist magazine:
Deflation is particularly deadly when an economy has lots of debt, because falling prices swell the
real debt burden. In America and Germany, firms and households have borrowed heavily in recent
years, lifting total debts of the non-financial private sector to 150% and 160% of GDP respectively.
In the early 1990s Japan's debt burden was equivalent to almost 250% of GDP. Japanese firms
are still much more in hock than those in America or Germany. On the other hand, American
households look more vulnerable. Even at the peak of Japan's bubble, households remained big
savers. Last year German households saved as much as 10% of their income; Americans saved
only 1.5%. 5
real debt burden. In America and Germany, firms and households have borrowed heavily in recent
years, lifting total debts of the non-financial private sector to 150% and 160% of GDP respectively.
In the early 1990s Japan's debt burden was equivalent to almost 250% of GDP. Japanese firms
are still much more in hock than those in America or Germany. On the other hand, American
households look more vulnerable. Even at the peak of Japan's bubble, households remained big
savers. Last year German households saved as much as 10% of their income; Americans saved
only 1.5%. 5
America is a post- industrial society. We are the richest most powerful nation on Earth. The problem is, even with our slowing economy,
America is an island of prosperity in a sea of economic turmoil. We can no longer depend on selling product to ourselves and expect the
economy to prosper. Most of our neighbors are too poor to buy cars, computers or much of anything else. Defense spending increases in the
US and missile defense in particular does not make our neighbors any better off economically. Thus, without new markets to conquer,
company revenue and market share cannot grow. Our trade deficit has grown larger under this government than any time in history.
America is an island of prosperity in a sea of economic turmoil. We can no longer depend on selling product to ourselves and expect the
economy to prosper. Most of our neighbors are too poor to buy cars, computers or much of anything else. Defense spending increases in the
US and missile defense in particular does not make our neighbors any better off economically. Thus, without new markets to conquer,
company revenue and market share cannot grow. Our trade deficit has grown larger under this government than any time in history.
As Amy Domini has observed:
The long-running bull market did not make more people believe they had a stake in the system. As of
1999, the median U.S. household income was $40,816. Half of the nation's households must budget
their food, clothing, shelter, health care, and other costs out of less than this amount. They have had
no real income growth since Richard Nixon was in office, when the nation's median household income
stood at $35,839 (in 1999 dollars). It gets worse: 20 percent of U.S. households have a median income
of $17,196. For a mounting number of people, there is no American dream. In 1999, the U.S.
Department of Agriculture estimated that 10.5 million households, about 31 million people, did not
have access to enough food to meet their basic needs. One out of every 137 Americans is behind
bars.
Last year, 1.2 million people declared bankruptcy; 98 percent of bankruptcy claims were filed by
individuals, not businesses. It seems extremely unlikely that these societal trends can be dealt with
effectively over the short term. However, certain industries may do well for brief spurts. A Desert Storm
II might well stimulate oil stocks and armament manufacturers. Continued assault on personal
freedoms and protections might give a boost to for-profit prison companies. And another great leap
forward in technology that creates another surge in demand may push some stock prices higher. Most
likely, market rallies will be industry- specific for the foreseeable future.
Investors must recognize the logic of pursuing public policies that support healthy capitalism and
rekindle economic growth. It's simple: A strong market depends on a healthy economy, which in turn
depends on a healthy society. We must address wealth and income disparities and the growing
underclass who feel abandoned and expendable. Otherwise, we defer the ability of financial markets to
return to health.6
The long-running bull market did not make more people believe they had a stake in the system. As of
1999, the median U.S. household income was $40,816. Half of the nation's households must budget
their food, clothing, shelter, health care, and other costs out of less than this amount. They have had
no real income growth since Richard Nixon was in office, when the nation's median household income
stood at $35,839 (in 1999 dollars). It gets worse: 20 percent of U.S. households have a median income
of $17,196. For a mounting number of people, there is no American dream. In 1999, the U.S.
Department of Agriculture estimated that 10.5 million households, about 31 million people, did not
have access to enough food to meet their basic needs. One out of every 137 Americans is behind
bars.
Last year, 1.2 million people declared bankruptcy; 98 percent of bankruptcy claims were filed by
individuals, not businesses. It seems extremely unlikely that these societal trends can be dealt with
effectively over the short term. However, certain industries may do well for brief spurts. A Desert Storm
II might well stimulate oil stocks and armament manufacturers. Continued assault on personal
freedoms and protections might give a boost to for-profit prison companies. And another great leap
forward in technology that creates another surge in demand may push some stock prices higher. Most
likely, market rallies will be industry- specific for the foreseeable future.
Investors must recognize the logic of pursuing public policies that support healthy capitalism and
rekindle economic growth. It's simple: A strong market depends on a healthy economy, which in turn
depends on a healthy society. We must address wealth and income disparities and the growing
underclass who feel abandoned and expendable. Otherwise, we defer the ability of financial markets to
return to health.6
We need to concentrate on creating new markets with a global Marshall Plan. An increase in defense spending has only worsened our global
economic problems. What will happen next is the value of the dollar will collapse.
economic problems. What will happen next is the value of the dollar will collapse.
Since the budget surplus is not quite what Mr. Bush and Congress expected someone is going to have to pay for these expensive pork barrel
Japanese tire of buying our debt, our economy now held hostage to foreign debt .... might very well collapse. Like drunks at a bar, the
Congress and the Administration have to pay their bar tab. There are alternatives to this stranglehold of greed and defense spending. One is
to find out what really happened to the September 11th hijackers. The Democrats and the Republicans have bankrupt our nation.
-------------------------------------------
1. US Consumer Spending – A Detour to Prosperity by Eileen Appelbaum on line at:
www.epinet org/webfeatures/viewpoints/consumerspend.html
2. Bankruptcies at All-Time High By Stuart Shepard December 2, 2002, Family News in Focus at:
www.family.org/cforum/fnif/news/a0023493.html
3. "U.S. Consumers Reeling From Higher Debt Burden" by John Wasik Jan. 17, 2007, Bloomberg at:
www.bloomberg.com/apps/news?pid=10000039&sid=an34gK1QCS.Q&refer=columnist_wasik
4. Bankruptcy filings reach all time high in 2002 December 30, 2002 St. Louis Business Journal at:
http://stlouis.bizjournals.com/stlouis/stories/2002/12/30/daily13.html
5. The risk of deflation. Comparing Symptoms November 7, 2002 at:
www.economist.com/finance/PrinterFriendly.cfm?Story_ID=1433891
6. Amy Domini, the founder of Domini Social Investments, is the author Socially Responsible Investing: Making a Difference and Making
Money (Dearborn). -0-(BN ) May/16/2001 18:52 GMT
Japanese tire of buying our debt, our economy now held hostage to foreign debt .... might very well collapse. Like drunks at a bar, the
Congress and the Administration have to pay their bar tab. There are alternatives to this stranglehold of greed and defense spending. One is
to find out what really happened to the September 11th hijackers. The Democrats and the Republicans have bankrupt our nation.
-------------------------------------------
1. US Consumer Spending – A Detour to Prosperity by Eileen Appelbaum on line at:
www.epinet org/webfeatures/viewpoints/consumerspend.html
2. Bankruptcies at All-Time High By Stuart Shepard December 2, 2002, Family News in Focus at:
www.family.org/cforum/fnif/news/a0023493.html
3. "U.S. Consumers Reeling From Higher Debt Burden" by John Wasik Jan. 17, 2007, Bloomberg at:
www.bloomberg.com/apps/news?pid=10000039&sid=an34gK1QCS.Q&refer=columnist_wasik
4. Bankruptcy filings reach all time high in 2002 December 30, 2002 St. Louis Business Journal at:
http://stlouis.bizjournals.com/stlouis/stories/2002/12/30/daily13.html
5. The risk of deflation. Comparing Symptoms November 7, 2002 at:
www.economist.com/finance/PrinterFriendly.cfm?Story_ID=1433891
6. Amy Domini, the founder of Domini Social Investments, is the author Socially Responsible Investing: Making a Difference and Making
Money (Dearborn). -0-(BN ) May/16/2001 18:52 GMT