Americans feel that government, at all levels, is sucking the life blood out of them through taxes and regulations. Lets just talk about the tax part of this perception. What are the facts of the tax burdens on Americans? How does our enormous military and security establishment and overseas empire fit into the picture? And, finally, do we need or want this empire and can we afford it? What options might we have to get out of this morass?
First to the question of whether Americans are really taxed excessively compared to the rest of the world. A trip to the Heritage Foundation (a bastion of “free market” ((Read my thoughts about “free markets” here)) conservative thinking) brought me to the data sets behind their Index of Economic Freedom charts. I extracted the tax burden data (total tax burden, for the US: federal, state and local) and present it here with the US, ranked 55th, and other developed or competitive countries highlighted in yellow (I only show the first 75 countries for brevity):
Tax Burden as Percentage of GDP – 2010
Based on this information it is clear that compared with other countries the US is hardly a high tax country. In fact, the US is near the bottom of the developed countries in tax burden. Here you have to understand that lots of the rhetoric around taxes in the US speaks in terms of marginal tax rates on personal and corporate income. Viewed from this perspective US tax rates rates are higher than many countries. As the rich and corporations well know, what matters is the actual taxes you end up paying. Having high marginal tax rates that are never really applied makes for some useful political cover for the actual facts. The data presented here shows the actual taxes paid after all of the exceptions and loopholes have been applied.
How Are Federal Tax Dollars Spent?
If you look at how Federal tax dollars are spent (see graphic from the Center for Budget and Policy Priorities) one can not help but notice that 55% goes toward the basic social welfare of the citizens in Social Security, health care, and “Safety Net Programs”and it still amazes to see how little is spend on infrastructure and the future (education and research).
Defense and Security
But, lets consider the fifth of the expenditures that go for “Defense and Security”. This sacrosanct fifth of the spending remains off limits for discussion. This is not how the country lived its life before WWII. Earlier in our history, the end of every major conflict brought a rapid demobilization. This reflected the founding father’s suspicion of standing armies. In the post WWII era, the real and imagined, much puffed up over time, Red Menace in the Soviet Union lead to a continuous state of warfare despite the renaming of the War department to the Defense Department. President Eisenhower, a renowned military leader of WWII fame, warned of the dangers of this permanent state of war in 1961 in the last speech of his Presidency:
This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence — economic, political, even spiritual — is felt in every city, every State house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.
In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. ((in the penultimate draft of this speech Eisenhower used the much more accurate phrase “military-industrial-congressional complex” (http://en.wikipedia.org/wiki/Military%E2%80%93industrial_complex) ))
The Global Miltary-Spy Empire
Today we have a global juggernaut of 716 military bases (Base Structure Report – 2009 PDF) outside of the continental US and, in addition, an indeterminate number of spy stations (not to mention extra-terrestrial stations). We have a military security apparatus that is addicted to super expensive high technology weapons. Our internal security apparatus (aka Homeland Security) combined with our longest war, the War on Drugs, is now spending some $40 billion dollars a year.
How does having 15,000 structures with 85,275,531 sq ft of space (3.1 sq. miles) on 126,828 acres of land (~approx. 200 sq. miles) with 35,688 military personnel and 5,500 US civilian employees in Japan contribute to our security? Or, what about the 758 buildings with 4,647,347 sq. ft. on 3,512 acrea of land in Turkey. (( this data comes from the same Base Structure Report)) Strangely (?) the Base Structure Report does not include bases we all know about in Iraq, Afghanistan, Uzbekistan, Qatar, Diego Garcia, among the ones I could easily identify.
Speaking of military personnel, we have 52,440 in Germany, the 35,688 in Japan (USFJ), the 28,500 in Republic of Korea (USFK), and the 9,660 in Italy and 9,015 in the United Kingdom.The DOD Report ACTIVE DUTY MILITARY PERSONNEL STRENGTHS BY REGIONAL AREA AND BY COUNTRY (309A) March 31, 2010 shows 369,000 military personnel overseas without accounting for the 140,000 +/- in Iraq and Afghanistan.
I have no means of knowing anything useful about US spy agencies, budgets, personnel, facilities or activities. All of this is kept under what is now a near inpenetrable cloak of “national security”. I guess the less we know the more flexibility they have to do whatever the powers that be want and need. We only have to look at the consequences of these practices in the run up to Bush II’s Operation Iraqi Freedom for a hint to the cost and efficacy of these efforts.
Are you feeling more secure? Is all of this spending actually making us safer in terms of our ability to deal with our actual homeland threats? How does this relate to terrorists, including those who might put a nuclear bomb in one of the tens of thousands of cargo containers that enter the country every day without effective inspection? How does this global empire contribute to our security here in the US? As a consequence of a permanent propaganda war aimed at every American by the military-industrial-congressional-executive complex ((I concocted this from Eisenhower’s original, in my eyes, inadequate formulation. It is clear that both Congress and the Executive are cheek and jowl with the defense and industrial elements at this trough)) for over sixty years, it is very difficult to sort out the existential threats to the country from those serving the needs of this cabal. Nevertheless, pause for a moment and consider how our military-spy empire actually contributes to our security here. Strip away the ongoing noise about terrorism and oil supplies (our largest imports come from Canada, Mexico, and Venezuela not the dreaded Arab states ((I have always thought that the threat of a shut off by these large suppliers is vastly overstated. If they don’t sell their oil, their incomes dry up almost instantaneously and quickly these governments are in trouble domestically. They have to sell their oil to stay in power)) )
The only way this makes sense is to see all of this for what it is: The US Global Empire. No one in the government, political parties and almost all of the media will talk about it. Stop for a moment, what else can you call a country with its military and spys parked on every continent in large numbers armed with the very latest technologies? What else can you call it when we have a foreign policy spanning 60 years dominated by collusion with and support of oppressive governments that happen, just by chance of course, to be aligned with us on every inhabitable continent excepting Australia. Think of our support for governments in Philippines, Indonesia, South Vietnam, South Korea, Laos, Egypt, Iran, Iraq, Israel, Guatemala, Chile, Congo, and on and on. What else can you call this but what it is, The US Global Empire. The politicians and the media wrap all of this up in the flag, terror threats, and a sustained campaign to maintain the illusion that military might is central to our safety and prosperity. Where are the Tea Party, Conservatives, and everyone else who roll out the “founding fathers” when it comes time to ask why we have a global empire when the founding father’s were very susupicious of standing armies? Who insists on following the Constitution’s requirement that Congress declare war? We have had literally dozens of military adventures since the end of WWII without a single declaration of war.
What Are The Real Threats?
Direct Physical Threats
There clearly are some real physical threats to the US. Terrorist attacks are one. Our current adventures in Afghanistan will undoubtedly turn out to be ill-fated and result in the enlargement of anti-US groups.The debacle in Iraq has already proven that case there. But, at least considering the efforts made on the terrorist front that we can see, the most serious threats do not appear to be on the radar of Homeland Security. Dirty nuclear bombs and bio-bombs will undoubtedly reach our shores soon. But, we have no effective program to monitor the millions of containers that come into our ports every year. Nor do we have an effective means to monitor and defend against such devices in smaller freighters and small boats. A terrorist attack using these means will put the September 11 attacks into their correct perspective, a pin prick compared to hundreds of thousands of deaths from a dirty bomb or bio attack.
The continued existence of thousands of nuclear devices in the US and the former Soviet Union pose significant problems for rogue state uses and the further spread of nuclear materials. We need a sustained effort to rid us of these weapons and move forward to a de-nuclearization of the world, including those in the hands of the Israelis.
The US appetite for drugs has sustained a protracted threat to domestic security. This is most prominent in our relations with Mexico, but the effects of the narco-empires can be seen almost anywhere in the US, urban, suburban, and rural. More than forty years into Nixon’s War on Drugs, we have nothing to show but a very sizable army of bureaucrats and armed agents. If there ever was a failed policy it is our approach to drug use in the US. Our refusal to look at the obvious and change course is now having disastrous effects in Mexico. Some might say that parts of Mexico fit a “failed state” description.
What are the direct military threats to the US? It must be seen as obvious and true that because we have vast oceans adjoining our east and west coasts that countries on the other side of these oceans can not be considered a credible physical threat. None of these countries has a military capable of reaching our shores. None has an air force with planes or missiles that can reach us. None has a significant naval force with long range capabilities. Looking to the north Canada is also not a military threat to us. It is a vast country with a mere tenth of our population. As noted earlier, Mexico is so troubled by its own internal security troubles that it does not constitute a military threat. And, no country in Central or South America constitutes a real threat.
One might add as a cautionary threat the nascent field of cyber-warfare. It is hard to judge the reality and scope of this threat. Over time it will certainly become more real.
Beyond Direct Physical Threats
Moving beyond the military threats to the US, we can look to the economy and society at large and see threats to our well-being, physical and spiritual. The shape of the world economy is without any doubt shifting. The post WWII hegemony of the US is coming to an end. This is evidenced domestically by the thirty year stagnation of real incomes for the middle class. More on this topic below. Internationally, our debtor nation status and shrinking share of the world economy are just a couple of more obvious indicators of this shift. To date we have no real national discussion of these changes nor policies to improve our performance economically within this shifting environment.
Our healthcare system continues to be ever more astonishingly expensive with declining health outcomes at the same time. Despite the passage of new healthcare laws this year, no real changes are in sight to make our healthcare affordable and effective. We will continue to spend almost 40% more than any other country and display health indicators that are well into the performance of countries that are described as “developing” (see some comparative data for 2003 here). This is an enormously destabilizing force in our domestic life both as individuals and as a society.
Despite the endless pro-family rhetoric of many politicians and others, the US remains a family unfriendly place. We persist in allowing preschool children to be warehoused in daycare that is largely un-programmed and staffed by people at the bottom of the economic ladder with little or no training. Our employment laws do not insist on real support to families from employers at all. There is no system of financial support to families to make good daycare a right for all children. This goes on despite the demonstrated efficacy of good daycare in jump-starting educational success. Even for middle-class families there is a well-known calculus that occurs between the cost of daycare and the earning power of parents, usually the female. Like the health care situation, the US does not have to invent some new solution to this problem. We can simply look around the world at any number of our competitors in the developed world to see policy solutions that are proven.
Our educational systems is not doing well in a number of ways. First, the K-12 system has been producing extremely uneven results and in aggregate the outcomes are a mix of results with many areas needing improvement. Here is a link to an interesting 2007 study by Jim Hull, “More than a horse race: A guide to international tests of student achievement” that describes in some detail these areas of mixed results with comparisons to competitor nations.
Our higher education system is generally the envy of the world. We produce many very well-educated people with a special focus on training that provides them skills to identify and solve problems. But, because of cost, access to higher education is becoming more treacherous and even so leaving many students with enormous loads of debt right at the outset of their productive lives when they should be free of debt and most flexible to building careers and families. US higher education is a sector whose costs are as out of control or more so than our healthcare system. It is hard to explain how this industry has gotten away with price increases exceeding inflation substantially for decades. It seems clear that a large part of this phenomenon is the vast expansion of Federal tuition grants and the even larger expansion of Federally backed credit. Without this twin of Federal subsidies for tuition and the expansion of credit to students, higher education could not have carried out the vast price increases without being punished by the marketplace. Though there are ongoing arguments that all of this debt makes sense in the long run, it is obvious that we are well into a phase in which a college education is no longer a guarantee of entry even to the lower middle class. With college students graduating with an average debt of $24,000 in 2009 and unemployment for recent graduates rising from 5.8% in 2008 to 8.7% in 2009 ((see Project on Student Debt)) this game may end soon. Nevertheless, higher education needs to be made much more accessible through a combination of policies that discourage cost increases and is less dependent on debt financing.
Our crumbling infrastructure is no secret. We drive, ride, and fly on it every day. We drink the water, flush the toilet, and turn on the lights as if these were features of the natural landscape. At both the Federal and state level delayed or no maintenance has been a way of public life for decades. The estimates of the costs for catching up are in the $ trillions. Meanwhile, we have no effective programs in place to upgrade our air control systems nor to move ahead on high-speed rail. It seems unlikely that market capitalism will respond to fill the gaps here. Capitalism is all about cost and responsibility avoidance. Although the large corporations may see that fixing the infrastructure is in their interest, there is no mechanism, short of supporting government which means higher taxes, for the individual firm to act and every competitive reason to avoid it. Capitalism is not about collective action.
Income and wealth inequality in the US are at Gilded Age levels. As has been reported quite widely recently, the top 1 percent received 23.5% of pretax income in 2007 – up from less than 9% in 1976. The share of wealth held by the same top 1% was 34.6% in 2007 up from 19.9% in 1976.
Stagnating or negative growth in personal income for 90%+ of Americans for over thirty years.
The US economy slightly more than tripled in size between 1973 and 2009 (in real dollars) from $4.2 trillion to $12.9 trillion. ((data comes from The US Bureau of Economic Analysis GDP data)) Meanwhile, the income gains of almost all Americans failed to keep pace with just the rate of growth of the overall economy.
A way of seeing the picture clearly is to set the real growth in GDP next to the real wages of production workers over the post WWII era. This graphic developed by Roger Chittum based on BLS data displays the trends for very easy visualization. The question boils down to what happened to all of the money – the products and services produced – that is represented by the gap between the blue line of hourly earnings and the real GDP production per employee. Who got this money?
Between 1977 and 2007 average after-tax incomes increased 25 percent ($11,200 per household) for the middle fifth of households and 16 percent ($2,400 per household) for the bottom fifth. But, the rich got enormously richer during this period. For the same period, average after-tax incomes for the top 1 percent rose by 281 percent after adjusting for inflation as is demonstrated by the graphic from the Center for Budget and Policy Priorities.
One might claim that this enormous redistribution of income and wealth is a natural function of markets and perhaps the increasing competitive advantages of rich people in education, health, and social connections. But, the wealthy have certainly not believed this fabulist tale of the wisdom of the markets. No, they have been busy for decades co-opting the whole political system and the machinery of governments to ensure that the outcomes were favorable to them. The recent Supreme Court ruling declaring corporate and private money to be speech and thus protected under the 1st amendment is simply the final round that has now changed annual floods of money into the political system into a tsunami. Here are a couple of books, one from 2003 and the other from 2010, that illustrate how the rich have been winning the class war: Johnston, David Cay. Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich – and Cheat Everybody Else (Portfolio Hardcover, 2003) and Pierson, Paul, and Jacob S. Hacker. Winner-Take-All Politics: How Washington Made the Rich Richer–and Turned Its Back on the Middle Class (Simon & Schuster, 2010).
Why is income and wealth inequality a threat? History suggests that societies with large inequalities require substantial social and political coercion to sustain the inequality. And certainly, even pseudo-democratic cultures like ours require some ineluctable sense that we are all in this together and not merely to line individual pockets. US history offers examples of substantial social and economic unrest caused by inequality. The ongoing struggle of labor to organize into unions and the concomitant efforts by corporate interests to resist are an easy example that spans the better part of a hundred years.
Social mobility has been a persistent part of our national myth. Horatio Alger lives on in most Americans’ minds. But, faced with enormous, persistent inequalities we could see this myth disappear. In the context of the past thirty years in which most Americans have seen no real income growth compared to the more than tripling of the economy, the real and psychological discomforts of this inequality will certainly erode the myth. We may see it replaced by cynicism at the benign end of a spectrum ranging to outright revolt against the plutocracy in society and their servants in the government. The later may seem hyperbolic, but the social glue that holds things together is not without its limits. Once severed it will be difficult to prevent serious disorder and a fascist counter-reaction from the elites.
And if the bulk of the American people become aware of the facts of this inequality difficult questions will arise.
It is simply not credible to think that US corporate chieftains earn 400 to 500 times the average worker (see graphic to the left) ((from Executive Excess 2008, the 15th Annual CEO Compensation Survey from the Institute for Policy Studies and United for a Fair Economy)) based on some real value creation multiplier. How is it that their compatriots in equally successful competitive firms in Europe and Asia only earn only 15 to 50 times the average worker? Are American CEOs so much better? The answer is emphatically “No” based on the actual performance of their firms. Or do these CEO compensation levels reflect that, like many other areas of their lives, the fix is in, in this case with their Board of Directors and the compensation consultants they retain?
All of this inequality flies in the face of our generalized democratic ideals that we all recognize:
- “…all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”
- equality before the law and in the halls of the government
- a fair opportunity to achieve at the highest level of our competences and energies
- a shared burden for the welfare of families, towns, cities, state and nation
Inequality that flies far beyond the boundaries of that expected by the normal differences in aptitudes, skills, and energies of people is dangerous for an open society. Those on the loosing side of the equation will grow restless. Those in power will seek to preserve their position and power through any means required.
Can We Afford The Empire Anymore?
Let’s envision a different world in which the US spent on military-security operations an amount roughly proportional to our population and the rest of the world’s spending, we would see a budget entry for military-security of roughly $40 billion. ((You can do your own estimates. World spending on military stuff was $1.48 trillion in 2008. Take out the 50% spent by the US and then apply US share of world population of 4.5%. This gives you a roughly proportional spending budget. Keep in mind that if the US was spending less some countries might increase or decrease their spending)) At our current levels of taxation this would free up >$650 billion to invest in infrastructure maintenance and development (high-speed rail, ultra-efficient cars, airports and air traffic control), housing (why do we have homeless people?), health care, education, research, childcare, energy efficiency, etc. And we probably could not effectively spend that much money in the early years so we could retire the national debt and have money left over to reduce tax rates.