GOODBYE, MIDDLE CLASS, Part 7: Slashed and Spent

Continued from Part 6: Our National Debt: From Tax Creeps to Tax Cuts

“In war, truth is the first casualty.” - Aeschylus

William Kleinknecht writes in The Man Who Sold the World, “Reagan proposed a $41.4 billion cut in the federal budget for 1982 that would include sharp reductions in food stamps, welfare, housing aid, unemployment insurance, and other programs for the poor. The cuts were designed to pare millions of Americans from the largest social welfare programs, with an estimated 400,000 households to be removed from the food stamp rolls alone. At the same time, Reagan proposed a $7.2 billion increase in military spending, a sharp decrease in corporate taxes, and a 30% reduction in individual income taxes, the latter measure designed to deliver the greatest benefit to the wealthiest 20% of taxpayers. The tax for the highest income bracket was trimmed from 70% to 50%. The measures amounted to a huge corporate giveaway. Many large companies with huge profits, like General Electric, would pay zero taxes over the next several years, or even get money back from the federal government. By 1983 the portion of federal tax receipts derived from corporate income taxes would drop to an all-time low of 6.2%, down from 32.1% in 1952 and 12.5% in 1980. The government would be drowning in red ink. Supply-side theory, which promised that a reduction in taxes would spur investment and actually increase tax revenues, turned out to be a fallacy. The president who had promised to reduce the size of government had instead produced unprecedented deficits that would dominate fiscal decision making for the next two decades.”

This increase in military spending has only grown. It is by far the largest slice of our nation's discretionary spending.

Considering the sizable chunk of discretionary spending earmarked for the military, one can’t help but wonder why politicians threaten to cut programs of incremental size, like PBS, or welfare, which can be found under the slim slice of Food & Agriculture in the economic pie.

The answer, however, is quite simple. Politicians’ constituents and special interests do not make money off PBS.

But they do make money off the military industrial complex.

“If you want to get something funded in the United States today, you need to find a way to shoehorn it into the defense budget," explains Rosa Brooks in How Everything Became War, and the Military Became Everything. "Congress seems increasingly disinclined to fund civilian diplomacy and development initiatives, much less education, environment, and antipoverty programs – but call something a military program and presto, money falls from the heavens."

Consider that the War on Terror boosted military spending back to Cold War levels.

The $1.7 trillion spent on the Iraq War included NO FUNDING for the following:

- police, firefighters, and hospitals

- tracking terrorists’ offshore money by inconveniencing American tax cheaters

- making city, state, or nation-wide evacuation plans

- wean ourselves off Persian Gulf oil to dry up the source of their money

- set aside money to deal with terror-related emergencies

- shut down vulnerable chemical and nuke plants near cities

- healthcare for 9/11 respondents [Over 2,620 have cancer-related illnesses, a total nearly equal to the 2,753 people who died at the World Trade Center during the attacks. Yet Congress has still not bothered to provide permanent support for our heroes.]

Instead, Iraq became an immediate threat overnight and deliberately became a showpiece of conservative ideology. The resulting fiasco will be felt for decades to come, as illustrated by Michael Goodwin in Economix.

Our “nation building” in Iraq consisted of:

- Capping their personal and corporate tax rates at 15%

- Not allowing them to restrict imports from the U.S.

- Allowing U.S. corporations to buy their assets and take the profits out of the country

- Giving control of their money supply to an independent central bank, prohibiting Iraq's central bank from offering financing to their own state-owned enterprises

- Creating a patent-friendly farm policy

- Privatizing everything

- Arranging for them to use Monsanto patented seeds for agriculture

- Laying off the entire Iraqi army of 400,000 trained and armed men with no way to provide for their families.

- Laying off 100,000 state workers, such as doctors, nurses, teachers, and engineers from the public sector

- Allowing museums to be looted while our troops protected the oil reserves

- Demanding Iraq hand its oil over to Western oil companies, despite them pumping and selling their own oil for 30 years

- Giving American oil companies unprecedented immunity against contractual disputes or lawsuits resulting from discrimination, labor law abuses, environmental disasters, and human rights violations.

- Instead of allowing Iraqi firms to compete for reconstruction contracts, handing them over to well-connected American corporations

- Allowing American companies to import cement, like their workforce, from abroad at up to 10 times the price rather than use the 17 state-owned cement factories and hire the tens of thousands of Iraqis out of work.

- Lining the pockets of private firms who stiffed American soldiers

- Forced Iraq to spend billions with Bechtel Corporation to rebuild an electric grid, which brought no improvement and only worsened the situation

- Leaving Iraq’s infrastructure worse than it was prior to invasion, with electrical systems worse than they were under Saddam.

This free-market "ideological blindness had three concrete effects," explains Naomi Klein. "It damaged the possibility of reconstruction by removing skilled people from their posts, it weakened the voice of secular Iraqis, and it fed the resistance with angry people." Enter ISIS.

It should also worry us that within the first two years after “the terrorist attacks of Sept 11, 2001, President George W. Bush and seven of his administration’s top officials made at least 935 false statements about the national security threat posed by Iraq," explains Charles Lewis in 935 Lies: The Future of Truth and the Decline of America's Moral Integrity.

In Twilight of the Elites, Christopher Hayes writes, “The cost of wars in Iraq, Afghanistan, and inside Pakistan total more than a trillion dollars over the past decade, which would be enough money to pay the inflation-adjusted cost of Roosevelt’s New Deal twice over – or ten times the amount of the Marshall Plan. But more brutal are the human costs: more than 6,000 Americans have been killed in action, and another 2,000 have taken their own lives while serving or after completing service. More than 47,000 troops have been wounded, and 1,400 have had a limb amputated... Unlike previous wars, which imposed some level of civilian sacrifice through rationing, higher taxes, or both, this last decade of war has been financed through government debt at the same time that total federal revenue from individual income taxes has declined by 30% in real terms…Then there’s the fact that in a nation of 90 million fighting age adults, less than 2% are serving in the armed forces. As a percentage of the population, that’s at the lowest level since before World War II…1.4 million active duty soldiers, with 3.1 million immediate family members bear the burden of waging the war. What’s even more striking is the degree to which the class of people serving in the military and their families is distant from the class of meritocratic overachievers who run the country…As family income increases, the likelihood of having ever served in the military decreases…the economic elites are very unlikely to serve in the military, and the all-volunteer force continues to see over-representation of the working and middle classes, with fewer incentives for upper class participation…The vast and increasing social distance between the overwhelming majority of current elite decision-makers and the warrior class amounts…to a corrosive civic scandal: elites wash their hands of this burden. It’s out of sight, out of mind.”

Perhaps if the sons and daughters of Congress were required to serve overseas, we’d likely never have engaged in war in the Middle East. It’s a lot easier to send the sons and daughters of the poverty class who enlisted to pay for college.

Hayes writes that the ruthless effectiveness of war-happy ideologues push the country “into an ever-widening circle of violent engagements. But what has enabled these conflicts to proliferate and drag on for a decade is the social distance between those same war-happy ideologues, along with those at the highest levels of political and economic power, and those who must, at tremendous personal cost, carry out the long war on the ground.”

If the nearly 6,000 American soldiers and countless civilian lives lost in the Iraq debacle wasn’t disheartening enough, the war profiteering by our Administration sure is.

Dick Cheney’s former company Halliburton, which earned $13.6 billion in revenue for providing security to American troops and Iraqi oil installations, had stock prices rise from $10 before the war to $63 per share. Good thing Cheney only sold 18.5 million dollars worth of shares from his former employer before taking the vice presidency, and held onto 189,000 shares and 500,000 unvested options. This means that as he contracted the company he owned a share in for Iraq, and watched the stock price sextuple, he collected millions each year from dividends. (AKA "war profiteering")


Rumsfeld did one better. He refused to sell his Gilead stock (his former employer), which sold for $7.45 at the beginning of his term, but do to the avian flu scare and the bioterror hysteria, and the government’s purchase of $58 million worth of Gilead’s Tamiflu, Rumsfeld ended up with stock worth $67.60 by the time he left office – an 807% increase.

The war redistributed wealth from American taxpayers to our political elite and their multinational corporations in unprecedented levels while leaving the Iraqis literally in the dark.

Naomi Klein proves in The Shock Doctrine that the primary economic role of these wars “was as a means to open new markets that had been sealed off and to generate postwar peacetime booms. Now wars and disaster responses are so fully privatized that they are themselves the new market; there is no need to wait until after the war for the boom – the medium is the message… Thanks to the model of for-profit warfare, the U.S. Army goes to war with Burger King and Pizza Hut in tow.”

Journalist Chris Hedges explains in Empire of Illusion that “The U.S. has become the largest single seller of arms and munitions on the planet. The defense budget for fiscal 2008 is the largest since the Second World War. More than half of federal discretionary spending goes to defense.” We have a permanent war economy. “Since the Second World War, the federal government has spent more than half its tax dollars on past, current, and future military operations. It is the largest single sustaining activity of the government. [It’s] especially lucrative to corporations because it offers a lavish form of corporate welfare." Especially with the proliferation of no-bid contracts.

​Need proof of our nation's catastrophically wasteful military expenditures? Remember Reagan’s Star Wars Missile Defense System? After two decades and $100 billion of taxpayer money, it still cannot stop a single missile.

The only thing accomplished was to transfer money from the government to defense contractors. Yet this same administration couldn’t afford to keep mental hospitals open, and sent our mentally ill to wonder the streets, homeless and untreated.

Despite the U.S. spending more on military than the next 10 countries put together, no politician questions the wasteful government spending in the military-industrial complex.

Our political elite are too busy bashing Planned Parenthood's $540 million and Public Broadcasting's $445 million budgets, while $12 billion in public funds are given to big business to subsidize over 50 new sports stadiums between 2001 and 2010.

Meanwhile, the media can track down one minority who once bought lobster with welfare money, yet turn a blind eye to the $90 billion earmarked for a Navy submarine fleet, or the $400 billion spent developing the F-35 Joint Strike Fighter. This cost doesn't even include building and maintaining them, nor can they even fly in bad weather or at night, and none have been used in combat.

Writes Thom Hartmann in The Crash of 2016, “We’ve made such a Faustian deal with the gods of war, that our economic survival at least over the short term depends on continually feeding the war machine. And feed it well we have. Between 1997 and 2012, our defense budget tripled. The double whammy of this is that when our manufacturing base is military, we produce things that don’t produce any lasting benefit for our society. When we build a school or a bridge, or a high-speed rail system, years, decades, sometimes centuries of use and value come from it. They produce for us over time far more than they cost us. Even consumer goods, from homes to washing machines to computers increase our personal ability to be productive, thus producing a return on investment, albeit not so visible in GDP as our infrastructure investments. But when we spend $100 million on a bunker buster bomb, and that bomb is dropped somewhere, that $100 million went up in smoke, never to be seen again. As the Romans and the Soviets and so many other Empires before ours have found out, military spending is the least productive and sustainable way to build an economy.

"A quick inspection of previous world super powers reveals that they all met their demise by economic collapse following binges of military adventurism, often after a desperate campaign was launched to protect the last vestiges of their empire. It’s what happened to the Romans, and also what happened to the Soviet Union, the last great economic superpower to collapse. After a 9-year military quagmire in Afghanistan, the Soviets found themselves so drained of resources that they had to withdraw their troops to tend to their own collapsing economy. Only a few years after the Afghan war, as Osama Bin Laden proudly proclaimed, the Soviet Union was in full meltdown. We didn’t get the memo. And today, at the behest of the royalists, our nation is still fighting more than a decade-long war in Afghanistan that’s producing the same empire-destroying consequences that befell the Soviet Union.”

But the military-industrial complex isn’t the only example of our government funneling tax dollars away from its constituents and outsourcing its responsibilities to the private sector. It’s just the biggest.

How did corporate enterprise engineer such a massive takeover of our democracy?

And it all started with the Powell Memo, which we’ll explore in:

Part 8: The Powell Memorandum; Or, Profits over People