Guns and Butter (Again)

When you stop to think about it, people measure how well their lives are going not by their absolute state of being but by their situation relative to their expectations. For example, a poor person in a developing country may be ecstatic about getting a pair of shoes for the first time; in contrast, a billionaire may commit suicide after he loses $100 million in a down market.

The same is true for nations. The American elite has enjoyed the United States’ dominant status in the world since World War II and became thoroughly drunk with U.S. superiority in the last two decades after the demise of the Soviet Union left the country as the only superpower. This elite is resistant to accepting the reality that a multipolar world will soon be at hand.

This reality will arrive much sooner if the U.S. does not retract its informal overseas empire, reduce the bloated defense budget, and act with more humility overseas. Even before the U.S.-led global financial meltdown, the far-flung U.S. empire of overseas military bases, U.S.-dominated alliances, and profligate military meddling in other nations’ affairs was terribly overextended. The U.S. accounted for 20 percent of the world’s GDP but 43 percent of its defense spending.

Yet like the elites of the British and French Empires, which became exhausted by being on the winning side of two world wars, the U.S. elite refuses to realize that the country needs to retract its cost-ineffective empire if it wants to avoid demise as a great power. After being occupied by the Nazis through much of World War II, the French ignored their post-war financial precariousness and tried to rekindle their imperial glory by retaking Indochina. When the spent French were not up to the task in the mid-1950s, Harry Truman and his successors made the foolish commitments for the United States to finance them, assist them, and later take over for them. Reluctant even then to give up their colonial mindset, the French then tried and failed to militarily suppress Algerian independence in the 1950s and 1960s.

Similarly, the British attempted to keep their Middle East dominance long after the sun had set on the British Empire. Even after their ill-fated invasion of Egypt in 1956—with the help of Israel and the irrepressible France—the British didn’t pull back from the Middle East until the early 1970s.

Currently, the United States has its finger in the dike in two pointless nation-building quagmires in Iraq and Afghanistan, while Osama bin Laden is most likely in Pakistan and the U.S. is being severely debilitated by an economic meltdown at home. Of course, Barack Obama was not responsible for any of this mess but may become captive of the interventionist U.S. elite in trying to deal with these calamities.

Economically, the Bush/Obama period ominously resembles the Hoover/FDR period, when a common recession was converted into a Great Depression by interventionist government policies that refused to let natural market mechanisms bring the country out of the economic slump. Let’s hope the current economic calamity doesn’t get this bad; but that we can no longer afford to maintain an extensive overseas empire hasn’t yet seemed to sink into the minds of the U.S. elite.

Another historical parallel is the Vietnam period, when Lyndon Johnson tried to run a guns-and-butter policy—funding the Vietnam War and expanding the government’s reach domestically by funding Great Society programs. Now, the Bush/Obama governments are trying to fund two wars while also spending at least $1.5 trillion to trick American consumers into thinking the government can save them from an inevitable recession—all the while making that downturn worse. On top of that, the bulge of baby boomers will soon begin retiring, thus putting pressure on collapsing Social Security and Medicare systems. During Vietnam and the Great Society, LBJ honestly—if irresponsibly—funded the ballooning government with a 10-percent surtax on corporate and income taxes. No such honesty has come from the Bush administration, as it cut taxes while raising federal spending dramatically. Now that an economic meltdown has occurred, Obama is understandably reluctant to increase taxes—and has proposed lowering them further—while continuing Bush’s spending spree to try to fool the country out of its economic collapse.

So we are staring trillion dollar budget deficits in the face. The federal budget is $3.1 trillion dollars a year but two-thirds of that is on autopilot—that is, guaranteed payments to people regardless of economic conditions under Social Security, Medicare, Medicaid, Food Stamps, and unemployment compensation or interest payments on the already staggering national debt.


Of the $1.1 trillion that can be more easily altered (discretionary spending), more than half of that is the monstrous defense budget. Thus, defense spending should and will eventually become a big target for Obama’s promised future fiscal restraint. Obama has good instincts on withdrawing from Iraq but is slowly being co-opted by the foreign policy elites and military bureaucracy. His instincts on Afghanistan are likely to be “unhelpful.” He wants to double down on a nation-building conflict that is stoking Islamist fundamentalism and will be much harder to “win” than Iraq (although the U.S. hasn’t won Iraq by a long shot).

ivan-eland.jpgObama needs to wise up, totally withdraw from both Iraq and Afghanistan, focus on finding bin Laden in Pakistan, withdraw from the U.S. Empire, and dramatically slash the U.S. defense budget. The U.S needs to take this revolutionary tack as one step toward renewing what is still the world’s largest economy—that on which all indices of U.S. national power ultimately depend. The U.S. can still be an economic superpower and have much influence in the world, but the days of being a globe-girdling military power are over. The U.S. foreign policy elite just hasn’t accepted it yet.

by Ivan Eland

Ivan Eland is Director of the Center on Peace & Liberty at The Independent Institute. Dr. Eland is a graduate of Iowa State University and received an M.B.A. in applied economics and Ph.D. in national security policy from George Washington University.This article first appeared in The Independent Institute and is republished with permission.


  1. MyLeftMind says

    Well said Ivan. Changing the mindset in Congress is the key to redirecting resources from ineffective wars to domestic problems. Unfortunately, Congress does what it does because each individual member stands to get richer and more powerful if they continue destroying our middle class and our economy. We’re hoping that the very people who benefit from the manipulation of our government by the military-industrial-corporate complex will somehow choose to give up their gravy train. That’s just not going to happen.
    We need a hero for the middle class, and Obama won’t be that unless we demand it, and back changes with clearly planned solutions. For instance, instead of the next bankster bailout they’re planning to implement when no one’s looking (during spring break or finals week at universities?) we should be ready with an alternate plan that requires the government to offer low interest, long term mortgages to families struggling to pay their bills. (The U.S. government took that very approach during the Great Depression with the HOLC program, which was one of the few federal programs that actually made money and ended when it was scheduled to end. Wow.) That would it help the struggling middle class, would support the flagging real estate market, and even helps out the greedy banksters by relieving them of high risk mortgages.
    Another way to help both middle class and working poor would be to revamp Obama and the Democrat’s faux health care reform bill. We don’t need a brand new system that costs millions of dollars to implement and billions to operate. And we certainly don’t need yet another welfare program that encourages people to NOT be productive workers. Socialized welfare-healthcare will drive independents to the right in the biggest backlash since Reagan. In spite of what Obama says about magically making the rich pay for this, the healthcare bill as it is right now will swamp our middle class. When have the rich ever paid their share of taxes? We need a better solution to offer our elected leaders before they destroy our chances for true healthcare reform.
    Instead of making the middle class pay for everyone else’s healthcare, and instead of this wealth redistribution scheme aptly labeled the “Insurance Industry Profit Protection and Enhancement Act,” the federal government should simply expand the single payer systems we currently have (Medicare, Medicaid, VA healthcare and native American healthcare programs.) Why build a whole new expensive system with its own government bureaucracy and spiraling costs? All we need to do is utilize the single payer systems we currently have, but give more people access to them. I’m not talking about socialized medicine or the next great welfare giveaway. We need a program that eliminates the biggest waste in U.S. healthcare: the disgustingly rich CEOs and the for-profit investors that drain the system and increase costs year after year (465% increase in profits during the recession, including a record $12.2 billion in profits in 2009, a 56 percent increase from 2008, and WellPoint’s obscene 91% increase from the year before.
    Let’s kill this current faux healthcare reform bill and give our Democrats and Obama a better plan that lets people CHOOSE to buy into our federal single payer systems like Medicare. Purchasing healthcare instead of insurance for healthcare would assuredly be cheaper for both individuals and companies because there will be no investor payoffs. The government doesn’t pay CEOs $24 million a year with $47M golden parachutes (cough, AIG). The beauty of this plan would be that people and companies can always choose to buy crappy insurance for more money than Medicare costs them. It’s not socialized medicine, and it’s not welfare. I’m guessing the influx of money from unionized workers, public employees and individuals wanting to pay less for better healthcare that Medicare will be bolstered enough that seniors will see reduced costs as well. Democrats might even capture votes from that demographic, and will certainly score political points for supporting small business and struggling Independents like those who just elected a Republican Senator in Massachusetts.

    When the people lead, the leaders will follow. It’s time to set a direction for our Democratic Party that pulls the rug out from the Insurance industry and military-industrial complex’s death grip on our government. Obama might just become the hero we all wish he was if we step up the plate ourselves and demand sensible solutions to our economic crisis.

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