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Redistributive Militarism: Escalating Military Spending as Disguised Income Redistribution from Bottom to Top

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According to the Urban Institute–Brookings Institution Tax Policy Center, "if the President's tax cuts are made permanent, households in the top 1 percent of the population (currently those with incomes over $400,000) will receive tax cuts averaging $67,000 a year by 2012. . . . The tax cuts for those with incomes of over $1 million a year would average $162,000 a year by 2012.”[11]

 

Official macroeconomic figures show that, over the past five decades or so, government spending (at the federal, state and local levels) as a percentage of gross national product (GNP) has remained fairly steady—at about 20 percent. Given this nearly constant share of the public sector of national output/income, it is not surprising that increases in military spending have almost always been accompanied or followed by compensating decreases in non-military public spending, and vice versa.

 

For example, when by virtue of FDR’s New Deal reforms and LBJ’s metaphorical War on Poverty, the share of non-military government spending rose significantly the share of military spending declined accordingly. From the mid 1950s to the mid 1970s, the share of non-military government spending of GNP rose from 9.2 to 14.3 percent, an increase of 5.1 percent. During that time period, the share of military spending of GNP declined from 10.1 to 5.8 percent, a decline of 4.3 percent.[12]

 

That trend was reversed when President Reagan took office in 1980. In the early 1980s, as President Reagan drastically increased military spending, he also just as drastically lowered tax rates on higher incomes. The resulting large budget deficits were then paid for by more than a decade of steady cuts on non-military spending.

 

Likewise, the administration of President George W. Bush has been pursuing a similarly sinister fiscal policy of cutting non-military public spending in order to pay for the skyrocketing military spending and the generous tax cuts for the affluent.

 

Interestingly (though not surprisingly), changes in income inequality have mirrored changes in government spending priorities, as reflected in the fiscal policies of different administrations. Thus, when the share of non-military public spending rose relative to that of military spending from the mid 1950 to the mid 1970s, and the taxation system or policy remained relatively more progressive compared to what it is today, income inequality declined accordingly.

 

But as President Reagan reversed that fiscal policy by raising the share of military spending relative to non-military public spending and cutting taxes for the wealthy, income inequality also rose considerably. As Reagan’s twin policies of drastic increases in military spending and equally sweeping tax cuts for the rich were somewhat tempered in the 1990s, growth in income inequality slowed down accordingly. In the 2000s, however, the ominous trends that were left off by President Reagan have been picked up by President George W. Bush: increasing military spending, decreasing taxes for the rich, and (thereby) exacerbating income inequality.

 

It is worth noting that even at its lowest level of 1968, income inequality was still quite lopsided: the richest 20 percent of households made as much as ten times more than the poorest 20 percent. But, as Doug Henwood of the Left Business Observer points out, “that looks almost Swedish next to today’s ratio of fifteen times.”[13]

 

The following are some specific statistics of how redistributive militarism and supply-side fiscal policies have exacerbated income inequality since the late 1970s and early 1980s—making after-tax income gaps wider than pre-tax ones. According to recently released data by the Congressional Budget Office (CBO), since 1979 income gains among high-income households have dwarfed those of middle- and low-income households. Specifically:

 
  • The average after-tax income of the top one percent of the population nearly tripled, rising from $314,000 to nearly $868,000—for a total increase of $554,000, or 176 percent.  (Figures are adjusted by CBO for inflation.)
 
  • By contrast, the average after-tax income of the middle fifth of the population rose a relatively modest 21 percent, or $8,500, reaching $48,400 in 2004.
 
  • The average after-tax income of the poorest fifth of the population rose just 6 percent, or $800, during this period, reaching $14,700 in 2004.[14]
 

Legislation enacted since 2001 has provided taxpayers with about $1 trillion in tax cuts over the past six years. These large tax reductions have made the distribution of after-tax income more unequal by further concentrating income at the top of the income range. According to the Urban Institute–Brookings Institution Tax Policy Center, as a result of the tax cuts enacted since 2001:

 
  • In 2006, households in the bottom fifth of the income spectrum received tax cuts (averaging $20) that raised their after-tax incomes by an average of 0.3 percent.
 
  • Households in the middle fifth of the income spectrum received tax cuts (averaging $740) that raised their after-tax incomes an average of 2.5 percent.
 
  • The top one percent of households received tax cuts in 2006 (averaging $44,200) that increased their after-tax income by an average of 5.4 percent.
 
  • Households with incomes exceeding $1 million received an average tax cut of $118,000 in 2006, which represented an increase of 6.0 percent in their after-tax income.[15]
  

Concluding Remarks: External Wars as Reflections of Domestic Fights over National Resources

 

Close scrutiny of the Pentagon budget shows that, ever since the election of Ronald Reagan as president in 1980, opponents of social spending have successfully used military spending as a regulatory mechanism to cut non-military public spending, to reverse the New Deal and other social safety net programs, and to redistribute national/public resources in favor of the wealthy.

 

Close examination of the dynamics of redistributive militarism also helps explain why powerful beneficiaries of the Pentagon budget prefer war and military spending to peace and non-military public spending: military spending benefits the wealthy whereas the benefits of non-military public spending would spread to wider social strata. It further helps explain why beneficiaries of war dividends frequently invent new enemies and new “threats to our national interests” in order to justify continued escalation of military spending.

 

Viewed in this light, militaristic tendencies to war abroad can be seen largely as reflections of the metaphorical domestic fights over allocation of public finance at home, of a subtle or insidious strategy to redistribute national resources from the bottom to the top.

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Ismael Hossein-zadeh is a professor of economics at Drake University, Des Moines, Iowa. He is the author of the newly published book, The Political Economy of U.S. Militarism His Web page is http://www.cbpa.drake.edu/hossein-zadeh
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