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How Our Trillion-Dollar Empire Is the Cause of Our 'Deficit Problem'

We could make the budget deficit disappear and fully fund Social Security and Medicare without raising taxes, if we only outspend our biggest military rival by threefold.

The United States spends more on its military and security services than the rest of the world combined, yet in the midst of a major debate over our fiscal situation, that enormous drain on our national treasure isn't really "on the table" in any serious way. Obama's deficit commission recommended cutting the Pentagon's purse, but the thrust of its focus was on veterans' pensions and health-care -- rather than, say, maintaining costly bases to defend such imperiled allies as Italy and Germany -- and the spending reductions were largely symbolic relative to the level of bloat that plagues our security budget.

One often hears that, in very rough terms, about a fifth of the federal budget goes to national security, another fifth pays for Social Security, a fifth or so is spent on Medicare and Medicaid and everything else makes up about 40 percent. But that, like much of the discussion of "defense" spending, is misleading -- it only counts dollars allocated in the annual defense budget, and in “emergency” supplemental bills.

That belies the reality that spending on the American security state is dispersed throughout the federal budget. So while next year’s defense spending, narrowly defined, is expected to come in at $711 billion, when you include all the extra dollars hidden away in other parts of the budget, that number will rise to as high as $1.45 trillion. That would represent around 40 percent of next year’s budget.

With Washington in the grip of deficit hysteria, that’s the elephant in the room whose name is never mentioned. As I wrote last week, the almost universally held belief that the the U.S. faces a deficit problem is wrong, and for two simple reasons. First, we have a very small government compared to the rest of the developed world -- between 2004 and 2007, the U.S. ranked 24th out of 26 countries in the Organization for Economic Cooperation and Development (OECD) in overall government spending as a share of our economic output. And we also currently have one of the lowest tax burdens -- In 2008,  we ranked 26th out of the 30 OECD countries in that category.

Nonetheless, America’s elites have coalesced around the idea that in order to keep our tax rates among the lowest in the wealthy world, we’ll need to swallow some painful “shared sacrifice” (which in Washington usually means working people sacrificing some economic security and the wealthy getting another tax cut). But it’s important to recognize that it’s an ideological choice to view the projected “budget gap” as a structural, economic problem driven primarily by the growth of “entitlements” -- it’s not a belief grounded in objective fact.

Instead of the ubiquitous stories about our "deficit crisis," the media could just as easily frame the country’s fiscal outlook as a problem of out-of-control health care costs fueled by the practices of the private insurance industry. As economist Dean Baker pointed out, “If the United States paid the same amount per person for health care as any of the 35 countries with longer life expectancies, we would be looking at huge budget surpluses for the indefinite future.” 

And they could also just as easily report that we face an unsustainably expensive overseas empire problem, made intractable by a deeply entrenched military-industrial-information complex. (The two areas of spending are intertwined -- well over a million Americans have served at least one tour in Iraq and/or Afghanistan, and tens of thousands of them who returned grievously wounded will require costly care for years to come. Economists estimate that even excluding those costs, the tab for the Iraq and Afghanistan operations may come in at $3 trillion dollars.)

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