Our Economy

We can best honor those who have given their lives for this nation in combat by making sure our military might is proportional to what America needs.

The United States spends more on our military than do China, Russia, Britain, France, Japan, and Germany put together.

With the withdrawal of troops from Afghanistan, the cost of fighting wars is projected to drop – but the “base” defense budget (the annual cost of paying troops and buying planes, ships, and tanks – not including the costs of actually fighting wars) is scheduled to rise. The base budget is already about 25 percent higher than it was a decade ago, adjusted for inflation.One big reason: It’s almost impossible to terminate large defense contracts. Defense contractors have cultivated sponsors on Capitol Hill and located their plants and facilities in politically important congressional districts. Lockheed Martin, Raytheon, and others have made spending on national defense into America’s biggest jobs program.

So we keep spending billions on Cold War weapons systems like nuclear attack submarines, aircraft carriers, and manned combat fighters that pump up the bottom lines of defense contractors but have nothing to do with 21st-century combat.

For example, the Pentagon says it wants to buy fewer F-35 joint strike fighter planes than had been planned – the single-engine fighter has been plagued by cost overruns and technical glitches – but the contractors and their friends on Capitol Hill promise a fight.

The absence of a budget deal on Capitol Hill is supposed to trigger an automatic across-the-board ten-year cut in the defense budget of nearly $500 billion, starting January. But Republicans have vowed to restore the cuts. The House Republican budget cuts everything else — yet brings defense spending back up. Mitt Romney’s proposed budget does the same.

Yet even if the scheduled cuts occur, the Pentagon is still projected to spend over $2.7 trillion over the next ten years.

At the very least, hundreds of billions could be saved without jeopardizing the nation’s security by ending weapons systems designed for an age of conventional warfare. We should shrink the F-35 fleet of stealth fighters. Cut the number of deployed strategic nuclear weapons, ballistic missile submarines, and intercontinental ballistic missiles. And take a cleaver to the Navy and Air Force budgets. (Most of the action is with the Army, Marines, and Special Forces.)

At a time when Medicare, Medicaid, and non-defense discretionary spending (including most programs for the poor, as well as infrastructure and basic R&D) are in serious jeopardy, Obama and the Democrats should be calling for even more defense cuts.

 

A reasonable and rational defense budget would be a fitting memorial to those who have given their lives so we may remain free.

 

Is it time for U.S. to consider going back to the future and bringing back some Great Depression-era regulation to help fix the current economic mess?

As Floyd Norris points out, Thursday’s slide in the Dow Jones Industrial Average and Standard & Poor’s 500 stock index means today’s markets have fallen as far as in the first few years of the Great Depression. And the job losses “from this recession are now worse than in 1981-1982, which is generally considered to have been the most severe economic downturn in the U.S. since the Great Depression,” writes Justin Fox.

So is it time for the government to consider bringing back Glass-Steagall? That piece of Great Depression regulation separated commercial banks from investment banks. Congress repealed it in 1999 so Citicorp and Travelers could get together.

Paul Volcker, who heads President Barack Obama’s Economic Recovery Advisory Board, thinks instituting something similar to the separations created under Glass-Steagall might not be such a bad idea, Bloomberg reports. Volcker wants to create a two-tiered banking system. On one tier would be commercial banks, which provide customers with depository services and access to credit and would be highly regulated. On the other would be securities firms, which would have the freedom to take on more risk and practice trading, “relatively free of regulation.” There is at least one difference, in Volcker’s plan commercial banks would be able to do stock-and-bond underwriting and provide merger advice.

Let’s look at class warfare from another perspective with another set of facts — facts omitted in your Sept. 23 editorial “Poor logic in taxing rich,” and in an opinion piece placed in the news section on Sept. 25, “It’s not as easy to be rich as it used to be.”

Except for the time right before the Great Depression, the gap between rich and poor in this country has never been greater. The typical American household made less money last year than a full decade ago (adjusted for inflation). That hasn’t happened in 80 years.

Over 46.2 million of us live in poverty, the highest number in the 52 years of the Census Bureau, while at the same time, the richest 1 percent of us (those making $380,000 or more) have seen incomes grow 33 percent.

And those living off the stock market (capital gains, dividends, investment and hedge fund managers) pay taxes at 15 percent. That is the same rate as those with taxable income over $8,500 to $34,500.

Corporations are earning record profits and sitting on more than $2 trillion in cash reserves, which could be used to create jobs.

American corporations currently pay less tax than any of the member nations of the international OECD (Organization for Economic Cooperation and Development). Our rates are higher, but between loopholes and deductions, our effective rate (the amount actually paid) is lowest.

Last year, 25 of the largest and most profitable corporations paid their CEOs more than their entire corporations paid in taxes.

Between the second quarter of 2009 and the fourth quarter of 2010, our nation’s income grew by $528 billion. Eighty-eight percent of that went to corporate profits, while 1 percent went to wages and salaries.

In contrast, when we were recovering from a downturn in the 1990s, 50 percent went to wages and salaries.

How can that sound fair, smart or even moral?

Great thinkers since Aristotle warned us that a healthy middle class is a necessity to maintaining a democracy. The deteriorating status of our middle class is seriously
endangering our future. Cutting waste and taxing fairly is the way out of this morass and on to a healthy future. Urge your representatives not to kill the goose (the middle class) that laid the golden egg.

Linda Ketner