David R. Henderson  

A Buck is a Buck

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Nick Schulz takes on Ezra Klein and me, calling our argument "preposterous." Recall that Ezra and I had both argued that in response to 9/11, which I presume Osama bin Laden was behind, the U.S. government spent a lot of extra money on war and on "homeland security." This spending, we argued, is helping drive the U.S. government toward bankruptcy.

What's Nick's argument? That the major contributors to future U.S. bankruptcy are the "poorly constructed entitlement programs," namely, Medicare, Medicaid, and Social Security. Nick is right. I certainly never disagreed with that. But a dollar is a dollar. Spending on the two wars and on homeland security accounts for about an extra $200 billion a year. That is not small change. Nick uses a graph that a reader who looks quickly will likely misinterpret. His graph shows that U.S. spending on "defense" [it includes a whole lot of offense] accounted for a smaller and smaller share of federal spending from the Korean war to 2000, with blips up for Vietnam and for the early 1980s Reagan defense build-up. But it also shows that after reaching its trough in 2000, defense spending increased as a share of federal spending, which is one of the points on which Ezra and I agreed.

Would we be heading to national bankruptcy had 9/11 never happened? Absolutely. But did the U.S. government's response to 9/11 take us more quickly in that direction? Absolutely. That's not "preposterous." It's just a fact.

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CATEGORIES: Fiscal Policy

COMMENTS (15 to date)
Phil writes:

Heritage Foundation, especially, and other pro-defense spending groups advocated for a time that defense spending should be pegged at 4% of GDP. Admiral Mullen endorsed the idea. They often used data similar to what Nick Schulz used and these advocates were quite vocal when defense spending was 2.9% of GDP. They are conspicuously quiet now that it is about 5%. In fact, since defense spending crossed the magic 4% line, I have heard no one raise the argument.

Whenever I hear advocates of higher defense spending use the % GDP (or % outlays) argument, I remind them that DoD uses dollars to buy things, not percentage points.

David R. Henderson writes:

"DoD uses dollars to buy things, not percentage points."
Beautifully put. I'll use that.

Sonic Charmer writes:

In my estimation these arguments are a form of psychological projection. It's simple: whatever has happened in/to the United States, since 2001, that you don't like, simply project them onto Osama bin Laden as 'his goals' and then lament that he 'won' because they happened. (Personally, I cried rivers of tears when the San Francisco Giants lost the World Series in 2002, just as Osama wanted. Another 'victory' for Osama!)

Sorry, developments in our country can be negative and lamentable without Osama bin Laden having 'wanted' let alone 'planned' them. This includes 'going bankrupt' (to whatever extent that it's even accurate to say that we are). Did Osama bin Laden want to bankrupt Iceland, Greece, Portugal, and Ireland as well (i.e. all either countries that actually *have* gone bankrupt, or threaten to, before the U.S.)? Do tell...

Helpfully, Osama bin Laden actually stated his goals in his actual declaration of war (sorry "fatwa") against the United States, which was issued in 1996. I don't believe I see 'driv[ing] the U.S. government toward bankruptcy' per se among them. Nor does us being supposedly 'bankrupt' seem to prevent us from making war in three (count 'em!) nominally 'Muslim' countries. Did Osama 'want' that too?? Because in the actual fatwa, the U.S. making war in Muslim countries and spilling Muslim blood is something he complains about an awful lot, and 'driving them out' certainly seems important to him. If Iraq/Afghan/Libya are exactly what he 'wanted' that's gotta be some weird reverse-psychology strategy book he was working from. Should we just go ahead and nuke the entire Middle East and give him even more of what he supposedly 'wanted'? The way you're talking it seems like a win-win!

In fact the top, almost only, goal bin Laden actually expressed interest in was getting the U.S. troop presence removed from Saudi Arabia. Therefore, if you are so inclined, you can say that Osama achieved this goal (and therefore 'won'?) in 2003 when the U.S. removed the bulk of its presence, bases etc from that place. In other words: if you, and folks like Ezra Klein, wish to complain about something that 'Osama won' you would have more facts on your side were you to express sorrow that the U.S. no longer has a military presence in Saudi Arabia. Is this, indeed, something you feel sorry about, for that reason? Let us know,

Sonic Charmer writes:

P.S. If OBL's primary goal was indeed to drive us to bankruptcy, then by this same argument every single budget item is a victory for OBL, in direct proportion to its size. Spend money on Medicare, Osama wins. Social Security, Osama wins. Scientific research, Osama wins...

After all, a buck is a buck!

David R. Henderson writes:

@Sonic Charmer,
On your first comment, point taken: I'll think about it.
On your second comment, not so much. I don't think OBL had preferences about Medicare.

Sonic Charmer writes:

Neither do I (which was my point), hence 'a buck is a buck' doesn't carry the weight you implied...

Don Levit writes:

To the list of entitlements, I would add the federal employees' pension plan, which is "funded" similarly to Social Security.
It is also, in a list of 4 categories, category 1, the strongest obligation for government to fulfill, along with debt held by the public.
In fact, the $5 trillion liability for federal employees' retirement is listed on the balance sheet, along with debt held by the public.
Future payments for Social Security and Medicare are category 4, the lowest level of government's obligation to fulfill, and are not even considered liabilities, by the FASAB, the federal government's accounting advisor.
Don Levit

hsearles writes:

Of course, your conclusion that his actions resulted in a worsening of that fiscal situation is correct, but I do not think that such a result is strong enough to say that he won. While all of your premises may be factually correct, they do not necessitate the conclusion that "bin Laden won." For me to conclude that, the adventures in Afghanistan and Iraq would have the be one of the primary factors guiding the US to bankruptcy and since it would have gone in the direction otherwise, I do not think they are decisive.

hsearles writes:

correction: "Of course, your *premise* that his actions resulted in a worsening of that fiscal situation is correct."

Jim Chappelow writes:

Actually, David's "buck is a buck" argument substantially understates the degree to which current fiscal problems can be laid at the feet of war spending.

Non-defense deficit spending should be partially counted, because (as Ura and Socker convincingly show) deficit spending combined with tax cuts drives increased demand for further deficit spending. To a large extent, it was the run-up in defense spending that pushed the budget from surplus into deficit immediately post-9/11.

After that point the feedback from the public's perception that the price of government services had fallen helped drive further demand for more deficit spending. To the extent that this occurred, increases in Medicare and other types of spending are at least partially attributable to the initial bout of deficit spending to fund the war. So, the share of the deficit that can be blamed on war spending is actually larger than the amount directly spent on the wars.

Steve Roth writes:

OBL's tactics were obviously not as effective as Reagan's vis-a-vis the USSR (assuming you buy into that narrative). But in their asymmetry, they were certainly far cheaper, and massively more effective per dollar.

I find it amazing that deficit/defense hawks are blind to this parallel.

Sonic Charmer writes:

Steve Roth - 'Effective' in doing what? 'Get the US to spend money' is not an interesting strategic goal in itself. All wars cause both parties to spend money; for example Germany and Japan caused the US to spend money in the 1940s, did they 'win' too? You really have to go further than this: okay we spent money, what is that meant to do? What tangible outcome will/should that achieve for this dead guy?

Here are some examples of outcomes: The USSR no longer exists. Osama bin Laden is dead. Iraq and Afghanistan are occupied countries while Libya is being bombed by a France-led(!) force, with hundreds of thousands of Muslims (if you believe certain counters..) dead in the process. If OBL's 'winning' strategy(?) is such a 'parallel' then what is the comparable outcome that he has achieved by it?

Again the one outcome we know he wanted was the removal of US bases from Saudi Arabia. I await the explanation from libertarians, or lefties such as Ezra Klein, as to why this is a tragic thing...

A corollary problem with this critique is that it effectively treats 'OBL wants it' as a synonym for 'bad'. Just because OBL (supposedly) 'wanted' this or that doesn't automatically make it a bad outcome; similarly, the (supposed) fact that he 'won' doesn't actually say anything interesting by itself.

Seriously, show of hands here, who vehemently believes we need to put a base back in Saudi Arabia to spite Osama bin Laden? Anyone?

Joe Cushing writes:

I have to agree with Ron Paul and say that we need to stop calling military defending defense. You used the word, offence, in parenthesis. That helps a bit. But seriously, how much of what the military does actually defends our soil from attack? Nobody is attacking us with anything the military could prevent or fight off. Nobody is invading the U.S. We could cut our military budget by 70% and not touch defense. The United States would be difficult to invade, even if it had no military at all. There are something like 100 million guns here after all.

Chris T writes:

I have to agree with Sonic Charmer on this one. The wars and increased defense spending cannot be blamed for bringing us to this point unless it can be show that we would not have reached this point eventually in the absence of it. I think we can all agree we were already on that path prior to 9/11 and the worst that could be said of the wars is that it moved the date up a bit.

The wars on their own were not remotely expensive enough to threaten the Federal Government with bankruptcy.

Steve Roth writes:

Sonic Charmer and Chris T: Points well taken.

I would simply say that OBL's tactics, and their economic effects resulting from our responses, made America much weaker, overall, globally. So they were effective, and because of asymmetry, delivered big bucks for the bang. (Compared, for instance, to the reverse asymmetry of the Reagan arms buildup; we spent *far* more than the U.S.S.R.)

I certainly don't buy into the notion that that economic effect gave him the "win" the way that (in the Reagan narrative) our arms buildup won us the cold war via economic upsmanship. AQ obviously did not achieved global hegemony and a worldwide Islamic Caliphate.

But just because AQ tactics have not achieved all their goals does not mean they have not achieved any of them. They have, and we have contributed to that achievement through a variety of misguided reactions, at our own expense. To the extent that our reactions have been misguided (open for debate in the particulars), we played into their tactics, did exactly what they hoped we would do, and contributed to the efficacy of their asymmetrical tactics.

Some of that certainly happened. We can disagree about the degree.

Simplistic black and white blathering about who "won" is boring and pointless. Ego-driven twaddle that was also the driver of many of our misguided, self-defeating actions.

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