US Military Spending on Uncle Sam’s Tab

Breaking news! The US just passed a bill approving the usual massive military spending. The amount is US$577.1 billion for fiscal year 2015, to be precise.

Not only that, it’s one that rejects ‘Defense Department efforts to cut military costs’, according to Bloomberg. Of course, there’s a War on Terror to fight — and it never ends!

That’s also the theme of New York Times journalist James Risen in his book Pay Any Price: Greed, Power and Endless War. I’ll get to that shortly. But let’s go back to that news.

Here’s Bloombergon the track record that’s been reliable for half a century:

While laws covering many other parts of the government routinely are allowed to lapse because of disagreements or disinterest, a defense authorization has been enacted for 52 consecutive years, a record lawmakers cite as a sign of bipartisan support for the military and the sacrifices made by American forces worldwide.

There are no sure things in the investment world, or the real world for that matter, but you’re getting pretty close when it comes to US military spending. The poor old American taxpayer can add the expense to America’s now $18 trillion dollars in federal debt.

Now, to be fair, the amount authorized in the bill is actually down from US$625.1 billion the year before. How long it stays down is the question. So is where those cuts in spending are.

I don’t know, but there might be a little clue in this line of the article: ‘Congressional negotiators granted part of the Defense Department’s request for help in slowing the growth of health-care spending.’In this case, personnel not on active duty have to pay more for their prescriptions.

What am I getting at? It’s the military hardware manufacturers that own the politicians, not the troops on the frontline. The little guy will get squeezed, not the big corporations.

The Bloomberg article suggests so anyway: it cites the ‘winners’ from the bill as missile maker Raytheon, Lockheed Martin Corp, Boeing, and General Dynamics — the usual suspects.

And if you need any evidence of how rich the pickings can be from America’s new ‘homeland security-industrial complex’ and the ‘permanent war on terror’, James Risen’s book Pay Any Price is the place to start.

We’re talking hundreds of billions of dollars being doled out to private contractors. Whether it’s drones, facial recognition technology, tanks, security systems, alarms, weapons or troop supplies — from the American homeland to the war zones, it’s big business.

And if you think Ben Bernanke and Janet Yellen have done a pretty good job of ‘helicoptering’ US dollars all over the world, the US military does something similar all over the Middle East — with the usual efficiency of government!

One of the most fascinating stories in Pay Any Price is how approximately US$20 billion that belonged to Iraq was flown from a stronghold in New York to the war zone in Bagdad:

‘…without any clear orders or direction on how the money was to be used. The controls on the money were so lax that few credible records exist of exactly how much cash there was or where the cash went…almost certainly, a portion of it ended up in the hands of some of the most powerful Iraqi leaders of the post-Saddam era. Billions of dollars in cash were wasted. And billions more simply disappeared.

Not that we’re told about most of this. Traditionally, Risen begins, at least the bastions of the US military-industrial complex were relatively visible, as was the money that flowed to them to build ships, planes and rockets.

What’s now scary, he argues, is the web of secret intelligent agencies and their contractors. They form an ongoing vested interest in keeping America’s permanent state of war going to keep the profits flowing.

As he puts it, ‘Only a small slice of society — including many poor and rural teenagers — fight and die, while a permanent national security elite rotates among senior government posts, contracting companies, think tanks, and television commentary.

In fact, war zone contractors outnumbered actual American troops in Iraq and Afghanistan, says Risen. One consequence of this is it allowed America to avoid the draft.

So you can see how a permanent war economy becomes tolerable to the citizens of America. The government issues bonds to finance the spending. It doesn’t have to resort to back breaking taxes like the kings and princes of Europe used to finance their campaigns. That pushes the costs into the future. Then the government uses its private army of mercenaries to do the dirty work.

This is all while the government clamps down on genuine investigative reporting. And that doesn’t even account for the times when the government and media collude to keep a story out of the public eye.

Suffice to say, Risen sees America locked into a ceaseless war economy. Keep an eye on the military budget. It appears it’s unlikely to get much smaller.


Callum Newman+
for The Markets and Money Australia

Originally graduating with a degree in Communications, Callum decided financial markets were far more fascinating than anything Marshall McLuhan (the ‘medium is the message’) ever came up with. Today Callum spends his day reading and researching why currencies, commodities and stocks move like they do. So far he’s discovered it’s often in a way you least expect.

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