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What Wars and Socialism for Corporations is Costing You.

By Ralph Lopez - Posted on 13 October 2011

A brazen reversal of reality has been a hallmark of our politics since Ronald Reagan's "Peace through Strength."  For the first time in the Post World War II Era embracing Orwell, or rather that which Orwell warned of, the authoritarian right in America, as distinguished from true small government Goldwater conservatives, did not hesitate to attack opponents or opposing ideas by appropriating their language and turning its meaning on its head.  The party which prepared for war in Reagan's unprecedented peacetime build-up was the party that was for peace.  Impoverishing the middle class to pay for tax cuts for the wealthy was in fact the road to "prosperity."  And opponents of the agenda stood for "socialism," even though unprecedented largess in the form of defense dollars was enriching stockholders and CEOs of military contractors with taxpayer money.  

The same weapons are being deployed now against the Occupy Wall Street Movement even though what that movement opposes is the very worst kind of socialism, socialism for those who need it least, in amounts which make the sum total of food stamp, public housing, other forms of public assistance, and even the Medicare and Medicaid program pale.  What the nation pays in taxes and debt in order to support the never-ending bail-outs for bad business practices tied to Wall Street and war contracting is several orders of magnitude greater than every poor and middle-class "hand-out" combined.

As a baseline for understanding these magnitudes the US federal budget for one year can be thought of as a little under $4 trillion.  The largest items can be thought of as a trio of three large accounts which comprise about 20% of the total each, Medicaid/Medicare, Social Security, and defense.  Social Security and defense are at around $600 billion each, and Medicaid/Medicare is at around $700 billion.  Interest on the debt is about 10%, and everything else, education, veterans benefits, food stamps, public housing etc. fits into that remaining 30%.

The cost of the war in Afghanistan is running at about $10 billion a month or $120 billion a year.  When the total cost to the economy of the Iraq War alone is calculated by economist Joe Stiglitz, in which he includes not only such factors as future benefits for disabled veterans but also forfeited income for spouses who must become primary caregivers, he arrives at a projected cost of $5 trillion.  Were a similar projection to be calculated for all present and future costs of the war in Afghanistan, this total could easily reach $8 trillion.

Turning to the Wall Street bail-outs, in startling testimony before a House oversight committee, Neil Barofsky, the special inspector general for government financial bailout programs, said the series of bailouts, bank rescues and other economic lifelines could end up costing the federal government as much as $23 trillion, what the journal Politico calls "a staggering amount that is nearly double nation's entire economic output for a year."

Barofsky resigned in 2011 after which Glenn Greenwald said he was " of the most impressive and courageous political officials in Washington" who "[stood] up to some of the most powerful people and institutions in Washington or on Wall Street."  Greenwald said Barofsky "vigilantly fought for his independence as TARP watchdog and has been relentless in his criticism of Treasury officials and especially Tim Geithner."

There is much which can be disputed and parsed in these numbers.   What cannot be disputed is that, between the wars and the bailouts, the US is spending an awful lot of money, none of that particularly productive or of much help to the typical taxpayer.  Put in another context, the entire outstanding US debt is a little over $14 trillion.  

What is not generally understood about the bail-outs is, far from being mostly paid back, the true costs have yet to hit.  Kevin Williamson writing for the National Review says:

Fannie Mae and Freddie Mac have an infinite line of credit at Treasury and portfolios bursting with the worst kind of junk. Plus, we are going to lose a bundle on the mortgage-assistance programs tacked on to TARP.  Short version: If TARP had only done what TARP was supposed to was prop up the banking system it still would have been a mess, but a mess for which the banks, not the taxpayers, ultimately would have picked up the tab. With everything that's rolled  up into TARP, we are going to take a bath.

Politico in its report on Special Inspector General Barofsky's testimony remarks that:

the enormity of the IG's projection underscores the size of the economic disaster that hit the nation over the past year and the unprecedented sums mobilized by the federal government under Presidents George W. Bush and Barack Obama to confront it...$23 trillion is more than the total cost of all the wars the United States has ever fought, put together. World War II, for example, cost $4.1 trillion in 2008 dollars, according to the Congressional Research Service.  Even the Moon landings and the New Deal didn't come close to $23 trillion: the Moon shot in 1969 cost an estimated $237 billion in current dollars, and the entire Depression-era Roosevelt relief program came in at $500 billion, according to Jim Bianco of Bianco Research.

As for the popular refrain in the media that the bailout money has been paid back, it is simply not true. Williamson in his commentary in the National Review writes in his article straightforwardly titled "Did the TARP Money Really Get Paid Back?":

No, not really. The part of TARP that deals with banks,  the big banks, anyway has largely been repaid: Goldman Sachs, Morgan, Wells Fargo, BONY, and the other bigfoot banks have paid back their loans.  But Citigroup paid back less than half of its bailout and the government took equity for the rest. We own a fifth of the company...We still have billions of dollars worth of warrants on equity in 280 companies... It will come as no surprise to you that the American Bankers Association has asked the government to cancel the warrants, representing another multibillion-dollar giveaway to the banks. The administration  is leaning toward accommodating that request...

So in addition to obligations that the taxpayers are on the hook for in the future, they have been made partners in failing businesses, with businessmen who couldn't run a hot-dog stand in Fenway Park without losing their house.  After GM proudly advertised that it repaid its government loan by issuing equity and making the taxpayers 3/5 owners of GM, re-paying the rest out of a taxpayer-funded escrow account, i.e., it repaid its government money with government money, National Review's Williamson reports:

Senator Grassley blew a righteous head gasket over that shenanigan, the Competitive Enterprise Institute filed a false-advertising complaint in response to GM’s dishonest PR campaign, and the stink rose so high that even the New York Times caught a whiff.

The link between Wall Street, war, and profit is something that Wall Street and its media minions are obviously not interested in documenting.  But evidence shows there is a positive correlation.  In one of its occasional bursts of good journalism which pokes its head up from time to time, MSNBC reported in 2006

"Stock price gains for defense contractors have averaged 48 percent while the overall stock market has remained flat. Stock market gains translate into higher pay for executives, who often reap windfalls from stock options."

What would the kinds of money we are seeing flowing toward these, again, not particularly productive purposes, buy the American taxpayer otherwise?  Weapons cannot be resold without risk of them being used against us.  Our experience has shown that even formerly staunch allies such as Pakistan, to whom we have forwarded many billions of dollars in military aid, can turn out to have been working against us all along, with elements in the highest levels of its military helping to plan attacks on American troops.  

There are 15 million college students in the United States, some who need help with tuition and some who don't, and potentially many more who are locked out due to costs.  Taking this 15 million as a baseline of college-age students, an additional $20,000 per year in addition to present programs for every single one of these students would amount to $300 billion, about what is spent yearly now on the wars in Iraq and Afghanistan.  Such a program of assistance could easily and cheaply be extended to include trade and vocational school, for non-college bound aircraft mechanics, HVAC technicians, and the host of trades which often put young people in better financial positions than college graduates (when I was just getting my Ivy League degree my high school friends in plumbing and AC were on their second homes.  The joke's on me.)

$300 billion fits into a projected $23 trillion for the bail-outs many, many times, and would cost no more than what we are spending on the wars. Such dreams are not unaffordable.  We are paying that money right now.  The difference is right now that spending benefits a very small number of people.

The bitter irony is that for a tiny fraction of what is spent yearly on military operations in Afghanistan, which is essentially a manufactured war, civil society could be given a boost through proven, tested aid programs run for and by Afghans, and the insurgency, with a complete withdrawal of American troops, would disappear, with the Taliban sidelined by lack of an opponent and Afghans having better things to do.  We are talking about what is spent two weeks in military operations, about $5 billion, for peace and an ally.

A decline in higher education graduation rates is among the most alarming economic indicators any advanced industrial society can see.  For non-resource-based economies, human capital is the only path to growth.  Tom Sugar of Complete College America told Deseret News in a report which was also carried on NPR:

"Unless things change dramatically and quickly, this will be the first generation in our history that will be less educated than their predecessors."

The point of the single example of significant additional assistance for higher education, trades, and worker re-training for workers later in life, extends to the plethora of needs currently unmet: public libraries closed on Sunday or all weekend, crumbling infrastructure, continuing dependence on oil even where mature alternative technologies exist, due to cut-over costs. The costs can be intangible.  Where does a child who really wants to study in a peaceful environment, in order to excel, perhaps away from an intolerable home environment, go on a Sunday if the library is closed?

This rough analysis of where our money is going is obviously not exhaustive and is only an eyeball, hand's-breadth assessment of magnitudes of financial flows.  What is clear is that despite right-wing media organs labeling the Occupy Wall Street protesters as bums and socialists looking for a hand-out, given the bailouts, the trillions of dollars in non-market driven, essentially cost-plus defense contracting over the years, the gradual erosion of whatever mild progressiveness may have existed in the bewildering system of federal, state, and local taxes which must include ever-present write-offs, deductions, depletion allowances, and loopholes, the "hand-outs" in this country are not flowing downward.  They are flowing upward.

The glee heard over the wars in what the investing class reads tells as much as a thousand numbers.  Investing Daily in its pre-surge  "How to profit from the war in Afghanistan" gushes:

"The Afghanistan troop surge means profits!...the likelihood that the U.S. will end up the loser in Afghanistan is a long-term worry. In the short-term, military contractors doing business in Afghanistan will make a boatload of money..."

The effects of bail-outs and wars on income distribution again can only be inferred, but the evidence is damning.  The Center for Budget Priorities reports:

"Two-thirds of the nation's total income gains from 2002 to 2007 flowed to the top 1 percent of U.S. households, and that top 1 percent held a larger share of income in 2007 than at any time since 1928."

One of our greatest Americans, head and shoulder to presidents, General Smedley D. Butler, before he died blazed with truth like a comet for the ages when he said in 1935:

"I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank."

When Butler awoke from his career as an overseer he dove with equal ferocity into denouncing the system which had used him, in the process becoming one of only 19 double Medal of Honor winners in US history.  Butler thundered in speeches across the nation:

"War is a racket. It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives... A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small 'inside' group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes."

Before his life was over Butler would blow the whistle on a treasonous plot by Wall Street to overthrow FDR, led by none other than George W. Bush grandfather Senator Prescott Bush, industrialist and Nazi sympathizer.

The spirit of Butler, even long dead, hovers large around the courageous youth of Occupy Wall Street, with Americans so lucky as to have had a man like him in their midst.  It is to him that this essay is dedicated.



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