JOBS FOR ALL COALITION %
CIPA, 777 UN Plaza, Suite 3C, NY, NY 10017
Report 4 © January 2004
Permanent War Economy:
Security or False Promise?
Every gun that is made, every warship launched,
every rocket fired signifies, in
the final sense, a theft from those who hunger and are not fed,
those who are cold and are not clothed. --Dwight D. Eisenhower
by Charles Bell, Westchester
People's Action Coalition, Sheila D. Collins,
Prof., Political Science, William Paterson University, Helen
Lachs Ginsburg, Prof. Emerita of Economics, Brooklyn
College, CUNY and Mary Malloy, Assoc. Prof.
of Economics, The College of New Rochelle, all members of the
Executive Committee, NJFAC
Can anyone forget the
shock of September 11, 2001? In the wake of the
terrorist attacks, the Bush administration announced a new “National
Security Strategy” that was supposed to make us more secure.
Washington had to do something to assure the
American public that it was protecting us.
But does a new policy of preemptive war and an escalating
military budget—in effect a permanent war economy--make us more
secure? Does it really protect our “American way of life?”
Does it guarantee our jobs and income security? Will
it shield us in ill health and old age?
Or is there a connection between the growing military
budget, shrinking domestic programs and rising inequality?
Where is real security to be found?
Permanent War Economy and the Threat of Terrorism
The $400 billion military budget for fiscal
year 2004 exceeds the combined expenditures of the other 20
largest military spenders in the world and is over half of the
world’s total military spending.
This figure does
not include the costs of the Iraqi war or the rapidly mounting
costs of reconstruction, nor, according to one of the Pentagon’s leading
analysts, is the budget designed for the kind of terrorist
threats we face. Moreover, much of it is subject to waste, fraud,
abuse and mismanagement.
The military budget already eats up the lion’s
share of all federal discretionary spending, crowding out vital
Washington not only short changes domestic needs
such as education, health care, environmental protection and
infrastructure repair. Even homeland security (not part of the
military budget) gets short-shrift.
We are spending approximately 10 times more on the military
than on homeland security.
The result: first responders in the nation’s
most vulnerable areas complain that they don’t have the money
to cope with looming emergencies.
Reservoirs, chemical and nuclear power plants
remain largely unprotected; ship and airplane cargo remain largely
unscreened. And states
are only modestly better prepared to respond to public health
emergencies than before 9/11.
The Coast Guard estimates that securing U.S. ports would require $5.4 billion
over ten years, but astonishingly, the Bush administration has
spent only $395 million for that purpose.
The country’s infrastructure of bridges, tunnels,
and dams “remains so vulnerable that it practically invites
terrorism,” said the head of a Council on Foreign Relations
task force on homeland security.
And rather than reducing the terrorist threat,
the Iraqi war has destabilized that part of the world and expanded
the number of terrorist attacks, bogging the United States down in a seemingly unending quagmire.
Spending and Jobs
wars bring prosperity? There is a widespread belief that wars
and military expenditures stimulate the economy, create jobs
and reduce unemployment. Some past wars have done that.
The most dramatic example is World War II, which finally ended
the Great Depression of the l930s. In the Cold War decades, large military budgets were
used to prop up the economy.
That approach is flawed. Like any government spending, military spending does
create employment, but it actually generates fewer
jobs for the buck than equivalent civilian expenditures. Why? Among other reasons,
it uses relatively less labor than other kinds of economic
activity. A billion dollars spent on domestic programs
like school lunches, health, child and elder care, education,
urban transportation or housing generates more jobs than a billion
dollars of military spending.
Even if an expanding
military budget creates some jobs, it could still lead to a
net loss of jobs in the overall U.S. economy if
domestic programs--which generate more employment--are slashed. This is the present and likely
future scenario, unless a commitment to high military budgets
Even if our new foreign policy does not lead to more
wars, saber-rattling may result in job losses in industries
like air travel and tourism, and the possibility of military
conflict dampens business investment.
Permanent War Economy = Rising Inequality
wins in the Permanent War Economy? During World War II, President
Franklin D. Roosevelt told the American people, "Not a
single war millionaire will be created in the United States as a result of this world disaster."
But today, things are different.
An unrestrained military budget coupled with tax “reforms”
that bestow their benefits overwhelmingly on the wealthy will
almost certainly worsen the already massive and galloping inequalities
that threaten to shatter the very core of our democracy—and
that have become a permanent fixture of our economy. Money buys political power and helps shape what
we think through control of much of the media and influential
think tanks. And with increased concentration of income and
wealth, economic policies such as tax “reform” increasingly
favor the rich and lead to even greater disparities.
contractors contribute heavily to political campaigns, and these
contributions correlate strongly with awards of defense contracts.
The earnings of their CEOs, once roughly the same as their counterparts
in other industries, are now significantly higher.
From 200l to 2002, defense spending rose by l4 percent,
but median total compensation of CEOs at the 37 largest publicly
traded defense contractors leaped by nearly 79 percent. At the
same time, overall CEO pay
rose by 6 percent. In
2002, CEOs of
major defense contractors raked in an average of $11.3 million, 577 times as much as the
annual earnings of an Army private risking his or her life in
Iraq—about $l9,600 (including subsistence and extra combat pay).
These soldiers are not winners, nor are persons
in the reserves and national guard who are called to protracted
active duty overseas.
the biggest winners are the CEOs of a handful of firms, like
Bechtel and Halliburton, with close ties to the Bush administration.
These firms used campaign contributions and insider connections
to win multi-billion dollar, no-bid contracts to rebuild Iraq and, to make matters worse, are bilking the American
This exemplifies what President Dwight Eisenhower, earlier a
leading World War II general, warned of in l96l: a nascent
“military-industrial-complex” that would “cause military spending
to be driven not by national security needs but by a network
of weapons makers, lobbyists and elected officials.”
expenditures not only create fewer jobs for the dollar than
other government expenditures, they produce a different job
mix--more concentrated in higher skilled and higher paying occupations
requiring at least a college education.
Thus, an expansion of the military budget will
tend to widen the rising wage gap between more highly educated
and less educated workers.
And low-wage workers, who also suffer from
the highest unemployment rates, will not be high on the list
of military job winners—except, perhaps, as cannon fodder.
(Enlisted men and women come disproportionately from
groups with limited economic opportunities.)
Even well-paid blue collar workers will not gain as much
from the military budget as in the past. Anti-war trade
union leaders have pointed out that military spending once created
good jobs for organized labor, but today military contractors
also send jobs overseas—Boeing among them.
Defense-related jobs are also geographically
concentrated, and consequently, not all areas come out winners.
By contrast, state and local government
expenditures and the jobs they generate are more evenly
distributed. And these jobs are threatened by the permanent
Military Spending +Tax Cuts = Deficits
will pay for these new policies? The
impact of military spending on inequality will be exacerbated
by the large and grossly disproportionate tax “reforms” enacted
by Congress. If the goal was immediate job creation, tax
cuts and refundable tax credits targeted to lower income and
working people would have been more effective than tax cuts
for the rich. The reason: poorer people spend a larger share
of their income. The main purpose of the tax cuts--some of the largest in history--was
not to create jobs and boost economic growth now, but to permanently
change the tax structure and reduce social spending.
And guess who comes out on top?
wealthiest Americans are now even further ahead than before.
Besides lowering the top personal tax rate, the 2001 tax cuts
phase out the inheritance tax that applied only to estates worth
more than $2 million.
Likewise, the 2003 tax cuts sharply reduced
the taxation of dividends, a source of income overwhelmingly
concentrated in the top 1 percent of the income pyramid. With
the 2003 cuts, 50 million taxpayers got no tax cut at all while
about half of all American families received less than $100.
By the end of the decade taxes on the richest
1 percent of Americans will fall 17 percent while the remaining
taxpayers will have an average reduction of 5 percent.
According to the Congressional Budget Office,
this top 1 percent has enjoyed a 30 percent drop in its income
tax burden since 1977.
Escalating military budgets,
combined with deep tax cuts, have turned federal surpluses into
huge deficits—approximately $400 billion as of October 2003.
These have pushed the federal debt to nearly $4 trillion, a
sum almost unprecedented since the end of World War II.
Federal deficits are not necessarily
bad. They can and should
be used to stimulate a lagging economy. Normally we would see
some job creation from a deficit. The Bush administration projected
that with its tax package, misnamed the “Jobs and Growth Plan,”
which went into effect in July 2003, there would be 5.5 million
new jobs by the end of November 2004. In the short run, there
would be 1.8 million by December 2003.
But only 221,000
had been created by then. Workers were left in a rut, with millions
fewer jobs in the economy since George Bush took office and
with job growth not even enough to make up for the new people
entering the labor force. In fact, Bush has presided over the greatest net job loss since the Great
The kind of deficits we are now
facing—fueled by enormous tax cuts for the rich and rising military
expenditures—are potentially disastrous for working men and
women. Over the long
run they could destroy more jobs than they will create and ensure
a policy straitjacket for future generations.
who used to rail against deficits, now embrace them. Their aim,
as a former chairman of Bush's Council of Economic Advisers
acknowledged, is to reduce the size of government--really social
spending-- with the military left out of their equation.
Hoping to reelect George Bush and to
privatize the system, most conservatives also exclude the expensive
restructuring of Medicare, described by a leading Senate opponent
as a “first step toward a total dismantling of Medicare.”
If Medicare goes, can Social Security be
The Military Budget +Tax Cuts = The Fiscal
Crisis of the States and Cities
Reduced federal spending has meant a greater
burden on state governments to fund domestic needs. Yet while states are required to pick up the tab, they
have faced their greatest fiscal crisis since the end of World
The National Conference of State Legislatures
estimated that between 2001 and 2003 states had to close a cumulative
budget gap approaching $200 billion
The fiscal crisis of the states was caused
reduced federal grants, increased costs for
homeland security, the general economic downturn, and federal
and state tax cuts. Moreover, the weak stimulus of the military
budget could hardly offset the combined burden of these policies.
Because many state income tax rates are linked to federal rates,
state revenues fell in tandem with the federal cuts. But unlike
the federal government that can run large deficits, virtually
all states are required either by their constitutions or laws
to have balanced budgets. Thus,
to make up for the shortfalls, states have been forced to dip
into reserve funds, slash basic services and/or raise taxes
and user fees. Typically,
states have cut services and shifted the burden onto cities
and towns, adding to the urban crisis that already afflicts
many of them.
hit by cuts in services are vulnerable populations who are often
concentrated in urban areas--families with disabled members,
single mothers and their children, the working poor and the
precarious middle class that is one paycheck or unpaid hospital
bill away from poverty. Moreover,
when state and local budgets are cut, not only are vital programs
affected, but so is a major source of employment. State
and local governments employ one in seven U.S. workers and have been a major source of job growth.
Blacks and women are hurt disproportionately,
since they are more likely than others to be government workers.
Indeed, these service cuts are likely to undermine the
government’s much touted welfare-to-work strategy which depends
for its success on government as both a source of employment
for women leaving welfare and as a provider of the services
they need to continue in the workforce--childcare, health care,
job training, etc. to continue in the workforce--childcare, health
care, job training, etc.
Public Health Insurance. 18 states
cut eligibility for fiscal year 2004; 25 states did so
for FY 2003. 21 states imposed new or higher co-payments
for FY 2004; 17 states did so for FY 2003.
Child Care Subsidies. At least 32 states
have cut eligibility for or otherwise limited access to
K-12 Education. 11 states made cuts
in for FY 2004; 9 did so in FY 2003. The effects include
new or higher fees for textbooks and courses, shorter
school days, reduced personnel, and reduced transportation.
Higher Education. States throughout
the country are cutting funding for higher education,
the only way out of poverty for millions of poor families.
This has lead to double-digit increases in college and
university tuition and reduced course offerings.
Beyond the suffering they inflict, these
cuts also constitute a drag on the weak economy. Many state programs that are funded by the federal
government assist families who have lost jobs or income, and
this added spending helps cushion the drop in overall demand. Cuts
in state spending also have serious ripple effects on local
economies, including those in rural areas. Cities have been hard hit. Cutting education or health
care, for example, means pink slips that also affect the local
tax base. Cutting funds
for poverty relief or child care means that cities have to cope
with more homelessness, increased crime and unemployment. Moreover,
rising military expenditures and reduced federal investment
in civilian research and technology, education, training,
health and physical infrastructure not only have an immediate,
negative impact on employment and living standards but threaten
future economic and social security as well.
Real Security Means Economic Security
In 1944, toward the end of a devastating
world war that followed a decade of deep depression, President
Franklin Roosevelt called for an “Economic Bill of Rights” to
guarantee jobs at living wages and other forms of economic security
such as health care and decent housing.
Linking economic security and freedom, Roosevelt declared: “Necessitous men are not free men. People
who are hungry and out of a job are the stuff of which dictatorships
are made.” Roosevelt’s Economic Bill of Rights was never enacted, but over the years, legislative
reforms moved at least partially in that direction. Tragically,
the truth that people in want are not free people seems to have
eluded our current policy makers.
as we go to war in the name of bringing democracy to countries
such as Iraq, our own security—and with it, our democracy--is
eroded by massive tax cuts for the rich and a military budget
that has no end in sight. History tells us that nations forced
to defend their empires at the expense of their domestic economies
may be doomed to decay.
The bedrock of real security lies, not in a
unilateral policy of permanent war, but in a policy of collective military and economic security abroad. At home, real security requires jobs for all
at living wages and an adequate safety net-
a fair tax system. These policies will not happen unless we
make them happen.
by Gertrude Schaffner Goldberg, Prof. of Social Policy, Adelphi
Univ. and Chair, NJFAC and June Zaccone, Economics (Emerita)
©The National Jobs for All Coalition,
a project of the Council on International and Public
The National Security
Strategy of the United States
of America, September 2002.
Most of the money in the military budget is devoted to
the production of high tech weapons that are the legacy of
the Cold War, and some, like
Missile Defense technology, may not even work at all.
Such weapons are useless against the kind of terrorist
threat posed by 9/11. Moreover,
there is tremendous waste in the military budget. Since 1995, the General Accounting Office has
ranked the Pentagon’s financial management as one of the worst
in government. In FY
2000, for example, the Pentagon’s own Inspector General noted
that $1.1 trillion couldn’t be accounted for.
Comments of Bill Moyers and Franklin (Chuck) Spinney in interview on Bill Moyers’ show, NOW, PBS. Aired
on December 5, 2003. Transcript available
Since 9/11 we have spent $151 billion on homeland security. The homeland security request for FY 2004 represents
no significant increase in spending over 2003. Steve Kosiak “Funding
for Homeland Security and Combating Terrorism Since 9/11,
” September 24, 2002; and “Homeland Security: Administration’s Plan Appears
to Project Little Growth in Funding,”
March 12, 2003. Center on Strategic
and Budgetary Assessments.
Philip Shenon, “Two Studies
Cite Confusion on Terrorism,” New
York Times, August 21, 2003
, A14; “Emergency Responders: Drastically Underfunded, Dangerously Unprepared,” Report of an independent
Task Force, Sponsored by the Council on Foreign Relations
“Are We Safer?” U.S. News and World
Report, Sept. 15, 2003, p. 26.
Stephen Flynn, quoted in ibid., p. 29.
Defense projects tend to have high employment in administrative,
accounting, marketing and lobbying activities in addition
to the more readily recognizable concentration of scientists,
engineers and other technical specialists.
David Gold, “Implications of Ballistic Missile Defense
for National Security, Defense Industries, and Labor Markets,”
in Richard F. Kaufman, ed., The
Full Costs of Ballistic Missile Defense (Washington, D.C.:
Center for Arms Control and Non-Proliferation and Pearl River,
NY: Economists Allied for arms Reduction, 2003, 96-97.
Telephone interview with Jeff Gruenert,
U.S. Department of Labor, Washington, DC by Helen Ginsburg, June 27, 2003.
Sidney Ratner, American Taxation: Its History as a Social
Force in Democracy (NY: WW Norton, 1942, p. 35) , quoted
in Sam Pizzagati, The Maximum
Wage: A Commonsense Prescription for Revitalizing America-by Taxing the
Very Rich (Apex Press,
1992), p. 57.
For an analysis of the role of big money in politics,
see, for example: Dan Clawson, Alan Neustadtl
and Mark Weller, Dollars and Votes: How Business Campaign
Contributions Subvert Democracy (Philadelphia: Temple
University Press, 1998).
Chris Hartman, and David Martin, “More Bucks for the
Bang: CEO Pay at Top Defense Contractors,”
(Boston: United for a Fair Economy, April 28, 2003).
“New Information May Bolster Questions on Halliburton,” New York Times, October 22, 2003.
David Gold and Jeff Gruenert,
Only in the late 1990's boom did wages for those at the
lowest end of the economic ladder begin to rise.
Bob Muhlenkamp, “Guns or Butter,”
The Nation, May 28, 2003 http://www.thenation.org;
Leslie Wayne, “Butting Heads With the Pentagon, New
York Times, July 23, 2003, C1.
“Ten Nobel Laureates Say the Bush Tax Cuts Are the Wrong
Approach,” published in the NY
Times February 1, 2003
The 2001 tax-cut legislation lowers the top estate tax
rate to 45 percent by 2007, increases the estate tax exemption
to $3.5 million ($7 million for a couple) by 2009 and then
repeals the estate tax altogether in 2010.
The repeal expires at the end of 2010, as part of the
general expiration of all provisions of the 2001 tax law.
Paul Krugman, “The Tax-Cut
Con,” New York Times, November 14, 2003; Citizens for Tax Justice, “Final Tax Plan Tilts Even
More Toward Richest,” June 5, 2003.
“Effects of the First Three Bush Tax Cuts Charted,” Citizens
for Tax Justice, June 4, 2003.
These figures, however, are artificially low, as the
government included the Social Security fund surplus as part
of the budget, masking what would otherwise have been a $560
billion deficit. Howell E. Jackson, “It’s Even Worse Than You
Think,” New York Times,
October 9, 2003, A37.
Even in November 2003, during what was described as an
economic “recovery,” four million fewer jobs had been created
than were needed just to keep up with working age population
growth since November 2001. Most states were facing troubled
job markets. In every state, the unemployment rate was still
higher than when the recession started. In 32 states, at least
a full percentage point more of the labor force could not
find work than at the official start of the recession in March
2001, and in eight of them there was at least a two percentage
point increase in the unemployment rate. This and data in
text from Economic Policy Institute, “Job Watch,” http://www.jobwatch.org
for November and December 2003.
Joseph E. Stiglitz, “Rumors
of War,” syndicated column.
Available from: http://www.project-syndicate.org/commentary/rumors-of-war;
Paul Krugman, "Jobs, Jobs,
Jobs," New York Times April 22, 2003.
David Firestone, “Conservatives Now See Deficits as a
tool to Fight Spending,” New
York Times, February
Sylvia Saunders, “Medicare Drug Plan,” New York Teacher, December 3, 2002, 6.
From 1994 to 2001, some 44 states enacted significant
tax cuts. The economic boom of the late 1990s, and in
particular the large increase in capital gains during those
years, temporarily offset the revenue loss resulting from
those tax cuts. Those temporary economic conditions
have ended. Yet most of the tax cuts of the 1990s remain
in place and are costing states some $40 billion or more per
on Budget and Policy Priorities, “A Brief Overview of State Fiscal Conditions and the
Effects of Federal Policies on State Budgets,” December 30, 2003.
For example, in l979, 8 million more people worked in
manufacturing than for state and local governments.
By 2002 manufacturing had shed 5 million jobs, while state
and local governments gained 5.5 million and employed
l8.5 million people, compared to l6.7 million in manufacturing.
Paul Kennedy, The
Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000, Knopf,
by Gertrude Schaffner Goldberg,
Prof. of Social Policy, Adelphi Univ. and Chair, NJFAC and June Zaccone, Economics (Emerita) Hofstra University
2004, The National Jobs for All Coalition, a project of the
Council on on International and Public Affairs.