Saturday, October 31, 2009

Why Shouldn't They Be Laughing? Cashing in the War Dividend & Bill Moyers - J.K. Galbraith Talk Serious NOW

Bill Moyers interviewed James K. Galbraith (no, his son - also an admired economist) on Bill Moyers Journal last night. If you want to know the similarities and differences of what is going on right now and what was going on right before the Crash of 1929, there is not a better source.

The only thing that has stopped our economy from already crashing on a par with that of 1929 are the institutions and regulations that were created after that little hiccup (which the Rethugs under the direction of Cheney, et al., were prevented (somehow) recently from changing). Galbraith (who wrote The Predator State) says that he's sure that Alan Greenspan (and all the rest) knew years before what was going to happen to the economy and did not act until he had to in order to stop the panic. Bill points out that it would have been criminal fraud and Galbraith says, "Sure!" Then Bill says in effect "How do you reform a system that pays off the top players so well?" Read on to know the answer.

BILL MOYERS: How does this last year compare with what happened after the Great Crash in '29?

JAMES GALBRAITH: It's similar in important respects and different in others. If you look at the trends in world trade and manufacturing, they're very similar. There's been a massive collapse, a collapse which is comparable in scale to 1930. The overall economy hasn't come down nearly as much, and the reason for that is that we have the institutions that were created in the New Deal and the Great Society, institutions of the welfare state, social security.

And, of course, there has been the influence of John Maynard Keynes, which gave us the very quick reaction in the form of the expansion bill of the stimulus package. And that also has kept the damage from being as large as it was in 1930 to '32. So what we're seeing today is distress of a different kind. And I think it's playing out on a longer timeframe. The great wealth that the American middle class built up, over 70 years, largely in their homes, has been terrifically impaired. In many cases, wiped out. People are upside down in their mortgages. Their mortgages are worth more than the houses that they live in. And that doesn't mean that they're going to default or millions will be foreclosed, but many millions more simply can't sell, can't move, can't change their circumstances, don't have a cushion. And that is a factor that will bring stress into their lives over time.

BILL MOYERS: A long time, right? And this is -

JAMES GALBRAITH: Over a long time, yes.

BILL MOYERS: - not something from which people recover. I mean, my father was about 24, 25, maybe at the time of the Great Crash of 1929 and he never recovered from it for the rest of his life. He never got over that experience. Is that likely to be the case with all these people suffering out across the country now?

JAMES GALBRAITH: The same was true of my grandfather on my mother's side, who was a lawyer whose practice depended upon the prosperity of the 1920s. My mother who lived until last year, never really overcame the attitudes that were inculcated in her in the Great Depression. It will have a - if something is not done to provide particularly young people, who are looking for work and cannot find it, with an opportunity to move on in life at this stage, it will mark them for the rest of their lives. I think there's no doubt about that.

BILL MOYERS: The NEW YORK TIMES had a story just the other day about community colleges being so crowded right now that they're holding classes up until two o'clock in the morning. What do you make of that? What does that say to us?

JAMES GALBRAITH: It says that first of all, people cannot find jobs. And secondly, they are looking to the educational system to provide them with something to do, and some way out of this dilemma. But until jobs are created, and in great numbers, there will not be places for those people to come out of the community college system and find useful work. That's the problem.We have a stimulus package, which is helping now, but it will be over with at the end of next year. Will there be a basis for another strong, privately financed expansion at that point? I don't see the evidence for that now. And that seems to me to be something we should be worrying about.

BILL MOYERS: So what should we do?

Read on.

From our buddy Tom Engelhardt at the TomGram comes this bit of not surprising news. (Emphasis marks added - Ed.)

Cashing in on the War Dividend - The Joys of Perpetual War

So you thought the Pentagon was already big enough? Well, what do you know, especially with the price of the American military slated to grow by at least 25% over the next decade?

Forget about the butter. It's bad for you anyway. And sheer military power, as well as the money behind it, assures the country of a thick waistline without the cholesterol. So, let's sing the praises of perpetual war. We better, since right now every forecast in sight tells us that it's our future.

The tired peace dividend tug boat left the harbor two decades ago, dragging with it laughable hopes for universal health care and decent public education. Now, the mighty USS War Dividend is preparing to set sail. The economic weather reports may be lousy and the seas choppy, but one thing is guaranteed: that won't stop it.

The United States, of course, long ago captured first prize in the global arms race. It now spends as much as the next 14 countries combined, even as the spending of our rogue enemies and former enemies - Cuba, Iran, Libya, North Korea, Sudan, and Syria - much in the headlines for their prospective armaments, makes up a mere 1% of the world military budget. Still, when you're a military superpower focused on big-picture thinking, there's no time to dawdle on the details.

And be reasonable, who could expect the U.S. to fight two wars and maintain more than 700 bases around the world for less than the $704 billion we'll shell out to the Pentagon in 2010? But here's what few Americans grasp and you aren't going to read about in your local paper either: according to Department of Defense projections, the baseline military budget - just the bare bones, not those billions in war-fighting extras - is projected to increase by 2.5% each year for the next 10 years. In other words, in the next decade the basic Pentagon budget will grow by at least $133.1 billion, or 25%.

When it comes to the health of the war dividend in economically bad times, if that's not good news, what is? As anyone at the Pentagon will be quick to tell you, it's a real bargain, a steal, at least compared to the two-term presidency of George W. Bush. Then, that same baseline defense budget grew by an astonishing 38%.

If the message isn't already clear enough, let me summarize: it's time for the Departments of Housing and Urban Development, Transportation, Health and Human Services, Labor, Education, and Veterans Affairs to suck it up. After all, Americans, however unemployed, foreclosed, or unmedicated, will only be truly secure if the Pentagon is exceedingly well fed.

According to the Office of Management and Budget, what that actually means is this: 55% of next year's discretionary spending - that is, the spending negotiated by the President and Congress - will go to the military just to keep it chugging along.

The 14 million American children in poverty, the millions of citizens who will remain without health insurance (even if some version of the Baucus plan is passed), the 7.6 million people who have lost jobs since 2007, all of them will have to take a number. The same is true of the kinds of projects needed to improve the country's disintegrating infrastructure, including the 25% of U.S. drinking water that was given a barely passing "D" by the American Society of Civil Engineers in a 2009 study.

And don't imagine that this is a terrible thing either! There's no shame in paying $400 for every gallon of gas used in Afghanistan, especially when the Marines alone are reported to consume 800,000 gallons of it each day. After all, the evidence is in: a few whiners aside, Americans want our tax dollars used this way. Otherwise we'd complain, and no one makes much of a fuss about war or the ever-rising numbers of dollars going to it anymore.

$915.1 billion in total Iraq and Afghanistan war spending to date has been a no-brainer, even if it could, theoretically, have been traded in for the annual salaries of 15 million teachers or 20 million police officers or for 171 million Pell Grants of approximately $5,350 each for use by American college and university students.

Next March, we will collectively reach a landmark in this new version of the American way of life. We will hit the $1 trillion mark in total Iraq and Afghanistan war spending with untold years of war-making to go. No problem. It's only the proposed nearly $900 billion for a decade of health care that we fear will do us in.

Nor is it the Pentagon's fault that U.S. states have laws prohibiting them from deficit spending. The 48 governors and state legislatures now struggling with budget deficits should stop complaining and simply be grateful for their ever smaller slices of the federal pie. Between 2001 and 2008, federal grant funding for state and local governments lagged behind the 28% growth of the federal budget by 14%, while military spending outpaced federal budget growth with a 41% increase. There is every reason to believe that this is a trend, not an anomaly, which means that Title 1, Head Start, Community Development Block Grants, and the Children's Health Insurance Program will just have to make do with less. In fact, if you want a true measure of what's important to our nation, think of it this way: if you add together the total 2010 budgets of all those 48 states in deficit, they won't even equal projected U.S. military spending for the same year. Take the situation of Massachusetts, for example. Yankee spirit or not, that state will see a 17.3% decrease in federal grants in 2010 no matter how hard Governor Deval Patrick wrings his hands. True to the American way, Patrick's projected $5 billion fiscal year 2010 deficit will be his problem and his alone, as is his state's recently-announced $600 million budget shortfall for 2009. Blame it on declining tax revenue and the economic crisis, on things that are beyond his control. No matter, Patrick will have to make deep cuts to elderly mental health services and disabled home-care programs, and lose large chunks of funding for universal pre-kindergarten, teacher training, gifted and talented programs in the schools, and so much more.

Still, that Commonwealth's politicians are clearly out of step with the country. On October 9, 2009, Boston Mayor Thomas Menino joined with Congressman Barney Frank in calling on President Obama to find extra money for such programs by reducing military spending 25%.

President Obama, cover your ears! Menino, who actually believes that a jump in military spending contributed to "significantly raising the federal deficit and lowering our economic security," asked the federal government to be a better partner to Boston by reinvesting in its schools, public housing, transportation, and job-training programs, especially for young people. Of course, this is delusional, as any Pentagon budgeteer could tell you. This isn't some Head Start playground, after all, it's the battlefield of American life. Tough it out, Menino.

One principle has, by now, come to dominate our American world, even if nobody seems to notice: do whatever it takes to keep federal dollars flowing for weapons systems (and the wars that go with them). And don't count on the Pentagon to lend a hand by having a bake sale any time soon; don't expect it to voluntarily cut back on major weapons systems without finding others to take their place. If, as a result, our children are less likely to earn high school and college diplomas than we were, that's what prisons and the Marines are for.

So let's break a bottle of champagne - or, if the money comes out of a state budget, Coke - on the bow of the USS War Dividend! And send it off on its next voyage without an iceberg in sight. Let the corks pop. Let the bubbly drown out that Harvard University report indicating that 45,000 deaths last year were due to a lack of health insurance.

Hip hip . . .

Suzan ________________________


rjs said...

galbraith seems to still be living in the past; americans will be put back to work when china decides what they want us to do; while we have spent our stimulus to encourage consumption, pay unemployment and entitlements, they have used theirs to build the infrastucture of the next century...

Suzan said...


when china decides what they want us to do

Prolly produce cheap goods for them then. We've worked hard here haven't we to turn our middle-class world upside down to benefit those few (1%) at the top and those many overseas?

Yay for US.

Thanks for your comments.


rjs said...

for twenty years this country has been surviving because we have fooled the rest of the world into trading us real goods for fiat paper, but they wont be fooled again; with china now sitting on over $2 trillion of foreign reserves they can foreclose on us & buy whatever they want, and indeed they are: half of africa, mineral rights to most of australia, and much of the oil in russia (25 year contract) and south america; meanwhile, in a world where our dollars will no longer be the reserve currency, we have nothing to trade for what we need to import (think oil) - and finally, managing to tie this rant into the rest of your post: US Manufacturing: Guns R Us

Suzan said...

By Jove!

I think you've got it.

And it doesn't have to be a quick process. They've got all the time in the world.

Love your blog!


half of africa, mineral rights to most of australia, and much of the oil in russia (25 year contract) and south america; meanwhile, in a world where our dollars will no longer be the reserve currency, we have nothing to trade for what we need

rjs said... point, i guess, is that galbraith was talking like we still control our own destiny, which we no longer do...

Suzan said...

Well, he's overly hopeful anyway.