Social vs. Military Spending-A Rejoinder

“Social vs. Military Spending”—A Rejoinder

[Published in the Review of Social Economy, Vol. 68, No. 2 (June 2010), pp. 221-225.]

The June 2009 issue of the Review of Social Economy published an article of mine, titled “Social vs. Military Spending,” in which I have argued that since the early 1980s, “opponents of non-military public spending have been using an insidious strategy to cut social spending, to reverse the New Deal and other social safety net programs, and to redistribute national/public resources in favor of the wealthy. That strategy consists of a combination of drastic increases in military spending coupled with equally drastic tax cuts for the wealthy. As this combination creates large budget deficits, it then forces cuts in non-military public spending (along with borrowing) to fill the gaps thus created” (pp. 163-64).

Professor O’Boyle has written a critique of my article, “Social vs. Military Spending: A Different Perspective,” in which he disagrees with my argument because, he claims “…there is abundant statistical evidence demonstrating that non-military public spending has not been sacrificed to satisfy the demands of the military establishment.” He further alleges, “…the evidence does not support his [Hossein-zadeh’s] sweeping claim that cuts in non-military public spending were necessary to close the budget shortfalls brought on by tax cuts for the rich and additions to military spending.”

To validate his contention, Professor O’Boyle ignores the evidence I have presented in support of the fact that there has, indeed, been an opportunity cost of combined increases in military spending and supply-side tax cuts in terms of social spending. The following is some of the evidence I have offered in my paper:

 

From the mid-1950s to mid-1970s, the share of non-military government spending of GNP rose from 9.2 to 14.3 percent, an increase of 5.1 percent. During that time period, the share of military spending of GNP declined from 10.1 to 5.8 percent, a decline of 4.3 percent. That trend was reversed when President Reagan took office in 1980. . . . From 1978 through 1983, real military spending climbed more than 28 percent, from $161 billion to $207 billion. During that period, real federal grants to state and local governments—a major source for investment in public works projects—dropped 25 percent, from $109 billion to $82 billion. From 1983 through 1988, military spending jumped another 27 percent in real terms, while federal grants to state and local governments ‘were practically unchanged. Thus, in the late 1980s only 13 percent of state and local government spending was going to public capital formation compared with an average of 30 percent in the 1950s and 1960s (p. 159).

 

Instead of addressing, challenging or refuting the facts I have thus offered in support of my view, Professor O’Boyle ignores them. He does this by disregarding the long-term (1950-2005) framework of my analysis and focusing, instead, on a narrowly focused time-frame, 2000-2008. By thus focusing only on a short-term framework Professor O’Boyle loses sight of long-term trends.

But even the statistical evidence he has presented for the 2000-2008 period fail to provide the hoped-for support for his thesis that there is no trade-off between military and non-military spending. The main (and, indeed, the only) evidence he offers in support of his claim is this: “In constant dollars, discretionary spending on non-defense programs has increased from $319.9 billion in 2000 to $401.4 billion in 2008 (see Table 1A). Constant-dollar outlays were higher in 12 of the 15 functional program areas reported by federal budget officials. In only two areas were those outlays lower.”

There are a number of problems with these statistical evidence. The first problem is that while Professor O’Boyle shows the change in non-military spending for the 2000-2008 years, he fails to mention the corresponding change in military spending, which, according to his own Table 1A, shows an increase from $295.0 billion in 2000 to $458.6 billion in 2008. This means that while non-military spending rose by 25.5%, military spending rose by 55.5%—2.2 times as much as the growth in non-military spending.

The second problem with Professor O’Boyle’s evidence is that they exclude the costs of Iraq and Afghanistan wars. According to a Congressional Research Service study, carried out by Amy Belasco (2009), the cost of these two wars since the U.S. invasion of Afghanistan in 2001 through the end of 2008 amounted to $794 billion. This means that the total increase in military spending for the 2000-2008 period was not just $163.6 billion ($458.6 billion – $295 billion), but $957.6 billion ($163.6 billion + $794 billion). On this basis, the rise in military spending for the 2000-2008 period would be 324.6%, that is, 12.7 times as much as the rise in non-military spending.

Professor O’Boyle defines the trade-off between military and non-military spending in a very narrow fashion: as long as the total dollars spent on non-military spending do not decline, there is no trade-off between military and non-military expenditures regardless of how much more or how faster military spending rises than non-military spending. Furthermore, he seems to think that if the trade-off does not take place simultaneously or within a short period of time, it can no longer be called a trade-off. He tends to disregards the fact that the colossal increases in war and military spending under President George W. Bush were financed largely through borrowing, or deficit spending. This means if aggregate social spending during his presidency did not decline in absolute terms, it did not mean that there was no trade-off between military and non-military spending, as Professor O’Boyle claims. It simply means that most of the trade-off, or sacrifice of the social for war and military spending, was postponed to be paid for by future generations. The time-frame of Professor O’Boyle’s study (2000-2008) is simply too narrow to show any meaningful trend.

The third deficiency with Professor O’Boyle’s argument is that he relies exclusively on official statistics—which are notorious for understating the true magnitude of military spending. As I have pointed out in my article (p. 152):

 

The real national defense budget, according to Robert Higgs of the Independent Institute, is nearly twice as much as the official budget. The reason for this understatement is that the official Department of Defense budget excludes not only the cost of wars in Iraq and Afghanistan, but also a number of other major cost items. These disguised cost items include budgets for the Coast Guard and the Department of Homeland Security; nuclear weapons research and development, testing, and storage (placed in the Energy budget); veterans programs (in the Veteran’s Administration budget); most military retiree payments (in the Treasury budget); foreign military aid in the form of weapons grants for allies (in the State Department budget); interest payments on money borrowed to fund military programs in past years (in the Treasury budget); and a number of other similarly misplaced expense items that tend to undercount the DoD budget.

 

Just as Professor O’Boyle denies that there is a trade-off between military and non-military public expenditures so does he rejects the detrimental effects of supply-side tax cuts on budget deficits and social spending. Why? Because the dollar amount or absolute magnitude of taxes paid by the high-income taxpayers has increased over time: “…the top one percent of all individual taxpayers . . . paid a total of $450.9 billion in 2007 compared to $94.5 billion in 1986. Their share of the total taxes paid rose from 25.8 percent in 1986 to 40.4 percent in 2007.”

Once again, like the case of military spending, Professor O’Boyle tends to bury the relative or proportional criteria for taxation (i.e., tax rates) under the amount of taxes paid in absolute or aggregate terms. The method of parading the total amount of taxes paid by the affluent without showing their incomes or tax rates is not limited to Professor O’Boyle; it is, indeed, a frequently used tactic of the proponents of supply-side tax cuts designed to disguise the generous tax reliefs for the super rich. Professor O’Boyle fails to show that during the same time-period that the share of the total taxes paid by the top one percent of income taxpayers went up their income rose much faster. As I have shown in my article (Figure 2, pp. 165-66), between 1979 and 2005, the average after-tax income of the top one percent of the population nearly tripled, rising from $314,000 to nearly $868,000—for a total increase of $554,000, or 176 percent. By contrast, the average after-tax income of the poorest fifth of the population rose just 6 percent, or $800, during this period, reaching from $13,900 in 1979 to $14,700 in 2004.

Professor O’Boyle also takes issue with my argument that “In light of the steady cuts of the infrastructural funding for the city of New Orleans, especially of the funds that would maintain and/or reinforce the city’s levee system, catastrophic consequences of a hurricane of the magnitude of Katrina were both predictable and, indeed, predicted. . . . It is not surprising, then, that many observers and experts have argued that Katrina was as much a policy disaster as it was a natural disaster” (p. 167). Instead, He claims, “It was not cuts in spending on the hurricane protection system that doomed the city, it was basic flaws in the design, engineering, and construction of the system not to mention ill-advised USACE spending on the MRGO project.”

It is quite likely that, as Professor O’Boyle suggests, “basic flaws in design, engineering, and construction of the system” may have exacerbated the destructive effects of Katrina. But that does not negate or contradict my argument, supported by many independent surveys and reports, that insufficient funding and policy disaster also compounded the natural disaster.

Judgments on the factors that contributed to the Katrina tragedy seem to have been divided along two major views of public policy and/or government responsibility. Proponents of neoliberal/supply-side economics tend to reject—as a matter of principle, regardless of facts—any suggestion that insufficient funding or inadequate public policy might have played a role in the disaster. Objective reports and independent studies, some of which I have cited in my paper, however, have come to a different conclusion: Hurricane Katrina was as much a policy tragedy as it was a natural catastrophe.

References

Belasco, A. (2009) “The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11,” Congressional Research Service, 28 September, <http://www.fas.org/sgp/crs/natsec/RL33110.pdf, Table 1>.