How can a government fix its debt problem?

We have all read about the standard “fixes” for a governmental debt problem–(1) inflate your way out of the problem, (2) cut programs and/or raise taxes, and (3) restructure debt, perhaps delaying repayment and giving bondholders a “haircut” on promised payouts.

A fourth one seems to circulate through peak oil circles, namely “debt jubilee”. It seems to me that there is really a fifth option as well, and that is the one that may actually get used more this time around, at least in some parts of the world. The fifth one is “do a disappearing act.” The government in question folds up, and maybe a new government is formed, or maybe not. If debt is really a problem, the new government would not take on the obligations of the previous government.

The country that exemplifies the “do a disappearing act” is the Former Soviet Union, but there are other examples as well. Both Czechoslovak Socialist Republic and the Socialist Republic of Yugoslavia broke up as well, about the same time. In the case of Yugoslavia, a war was involved, but in the other cases the breakup was relatively peaceful.

It takes energy and money to maintain a country that covers a large area. If energy is cheap, then it is easier to provide needed services–economic growth is higher, costs of transporting goods long distances are lower, and collecting taxes works better. As long as a country is growing economically (especially if there is job growth to go with the economic growth), then it is easy to collect rising amounts of tax dollars, because the tax code that is in place provides rising tax revenues simply because of income growth, without formally raising taxes.

When an economy shifts to no growth or actual economic decline, with falling GDP, then it is much more difficult to keep tax revenue from falling. There are theoretical ways of fixing the problem (all of the ways on the list above), but if there is a major imbalance, then solutions (2) and (3) above don’t work well at all, and a government needs to resort to some other approach.

Example of the Soviet Union Breakup

If we look at the example of the Former Soviet Union (FSU), we find that they were faced with falling prices with respect to their major export, oil, and because of this were having major financial problems, prior to their break-up:

Figure 1. Former Soviet Union oil production and oil price (2010$) based on BP Statistical Data

The peak in oil prices came in 1980.  The Soviet Union continued drilling. We don’t know what their cost of production was, but presumably, they could continue to make at least some profit at the lower prices in the early 1980s. Wikipedia tells us, “Although statistics of the Soviet economy are notoriously unreliable and its economic growth difficult to estimate precisely, by most accounts, the economy continued to expand until the mid 1980s.” In another Wikipedia article we read, “The dramatic drop of the price of oil in 1985 and 1986, and consequent lack of foreign exchange reserves in following years to purchase grain profoundly influenced actions of the Soviet leadership.”

In 1987, FSU production hit a peak of oil production, presumably reflecting the fact that there was less oil available that could be profitably pumped at the low prices. This would seem to tie in with the lack of foreign exchange reserves, mentioned above. Finally in 1991, four years after oil production fell, the FSU collapsed. It was only when prices started rising again in the 2000s that production began to rise.

Figure 2. Former Soviet Union Oil Production and Consumption, based on BP Statistical Data.

When we look at FSU oil consumption (Figure 2), we find that it did not fall until 1991–the year of the collapse. The actual collapse came in December. Prior to that, oil consumption had remained level, despite falling oil production since 1987 and despite falling revenue from oil production, starting even earlier.

After the collapse of the Soviet Union, both production and consumption fell further. In fact, production and consumption of natural gas and coal fell as well. Even today, consumption of oil is low. Natural gas consumption has risen somewhat, but the FSU uses much less fossil fuels than it did prior to its breakup.

Why a Government Needs to Keep Tax Revenues Growing

A government exists to provide services to its citizens. Some of these services are things that take place on an ongoing basis–road building and repair; operation of schools; police and armies; issuance of patents; operation of parks; and regulation of food and drugs, for example. Some of these are more long-term–for example, Social Security, Medicare, FDIC guarantee of bank accounts, and PBGC guarantee of pension payments.

Maintaining these programs depends on economic growth to a significant extent. Long-term programs especially depend on economic growth, to keep them properly funded. Pension plans are based on the premise that the stock market will keep growing, and that bonds will pay out according to plan. If this is not the case, the government gets left trying to make up the shortfall.

Even on a short-term basis, governments are hit doubly hit by the recessionary impact of high oil prices:

(1) Outgo is higher, because of stimulus costs, bailouts for organizations that need bail-outs, and higher benefit costs, directly or indirectly because of unemployment.

(2) Income is lower, because fewer people are employed and pay taxes. For local governments, there may also be the issue of falling home values making it harder to collect enough tax revenue.

Figure 3. Average quarterly oil price and US Federal External Debt

Governments find themselves quickly going into debt, when recession hits following an oil price spike. Figure 3 shows how quickly this happened for the United States, when oil prices spike in July 2008. It also shows that the increase in debt is continuing. Now we have a second oil price spike, and the possibility of another recession. If the government tries to provide stimulus as in the past, it faces the possibility of a widening gap between revenue and expenditures. If the government cuts benefits and lays off workers, it is likely to send the country further into recession. But sometimes there seems to be no other choice.

Considering Options to Get Out of a Debt Problem

Option 1. A country’s first choice for dealing with debt is to try to inflate its way out of debt. Ben Bernanke is known as “Helicopter Ben” for his speech in which he mentions Milton Freeman’s previous mention of using a helicopter drop of money to prevent deflation.

In order to allow citizens to repay their debts, it seems to me that what needs to be inflating is salaries. Also, enough people need to be working, so that most people are actually collecting the funds needed to repay debt. If salaries are inflating and enough people are working, then business revenues and government revenues will inflate as well, so that repaying debt plus interest won’t be too terrible a task. At this point, there is not even a hint that salaries are inflating, and that the unemployment problem has been solved.

Option 2. If a country has just a “little” debt problem, then option (2) above, raising taxes and/ or laying off workers/cutting programs might work. The downside is that it is likely to send the country further into recession, and will make many voters unhappy. A politician who wants to be re-elected may therefore find this approach objectionable. In most cases, it needs to be combined with cutting longer term programs, something else that voters are likely to find objectionable.

Option (3) above, restructuring debt, perhaps delaying repayment and giving bondholders a “haircut” on promised payouts, would be a shock to financial markets. Governments are accustomed to borrowing increasing amounts of money. Once restructuring of a debt of a major country starts taking place, that country is likely to have a hard time obtaining new debt, except at very high interest rates.

If a country defaults using this approach, the action is likely to be looked down upon by both governments of other countries and by voters. Unless the revenue/expenditure problem was really tiny prior to the default, the government will still faces a major need for austerity–cutting programs and raising taxes, in order to match revenues and expenses, and have enough to repay the debt on the more generous terms. Option (3) only works if the country is in a fairly good financial state prior to the default–that is, on an ongoing basis, can pay for its programs, and still have money left over to pay back debt. There are many OECD countries not doing this well.

Option 4. A debt “jubilee” of some sort, in which all debts are forgiven. I have a difficult time seeing any agreement to this kind of thing happening, because there will always be winners and losers, and the losers will be unhappy. There are assets underlying some of the debt, and the question will be, which of the several possible claimants should get the underlying asset. For example, if a person has paid for 25% of the value of his home, should he get to keep it, or should one of the various owners of the mortgage on the home get possession of the home? Some of these debts will be international. What is to prevent retaliation, in the form of a grab of property of some other property-owner, if there is a default in a foreign country?

There is also the problem that the debt jubilee doesn’t really help with all of the long-term programs that cannot really be funded with declining resources.

Figure 4. Two views of future growth

When programs such as Social Security, Medicare, and guarantees of banks, insurance companies, and pension funds were established, the view was that resource growth /economic growth would continue forever, as in Scenario 1 of Figure 4.  If the real situation is more like Scenario 2 of Figure 4, there is a need to rework the whole system–reduce promised benefits, and probably forget the bank and pension guarantees. It is hard to see that these ideas would “sell” well with voters.

Option 5 looks like the easy way out. Just give up, and let a new government come in, and start with new programs and a blank slate. Or a revolution or civil war might produce this same result.

There seems to be a chance that if Option 5 occurs, there will never be a replacement for some governments. No replacement central government came into existence in the case of the Soviet Union break up, or the breakups of Czechoslovak Socialist Republic and Socialist Republic of Yugoslavia.

There are many locations where such break ups would seem to be possible. The European Union is one entity that would seem to be at risk of break up, if things continue to go badly with respect to the debt of individual members. The United States seems solid, but when a person looks at its debt situation, there would seem to be at least a small chance that at some point in the future, it will cease to exist. Canada doesn’t have quite the debt problems of the United States, but it has huge disparities among regions that increase tensions, especially if the US should break up.

There would even seem to be the possibility of breakup at a lower level than country. If the United States should break up (with perhaps some states regrouping to form new unions), it seems as though a state with huge debt problems, such as California or Illinois, could also break up, leaving counties to regroup as they choose.

There are no doubt many countries around the world where this pattern could hold. Many countries were put together by combining people of various ethnic backgrounds. If things go badly financially, and transportation becomes more difficult because of fuel problems, these countries  too could be at risk of break up.

Obviously, if this pattern of break-up were to occur, there would be huge ramifications for international trade, for international businesses, and for lives of individual citizens. We can hope that I am wrong, and that our current systems for handling debt problems will somehow work provide solutions for most.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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71 Responses to How can a government fix its debt problem?

  1. Ed Pell says:

    Those who control the US have no loyalty to the US. They have Swiss bank accounts and houses around the planet. So they will not self sacrifice. There purpose is to steal as much as they can even if it destroys the US. The military “over-reach” serves the economic (and some political) interests of ruling class. To the harm of the America people.

    Today many Americans are poor and are not materialistic wither by choice or by need.

    The government can not build for the benefit of the people. The way it works is taxes from workers pay to build assets for the rich that they own and profit from forever and the workers get nothing. So if you can find a good way to hide the transfer of wealth it might happen. The state of California might do something worthwhile.

  2. wiseman says:

    @Gail, I got redirected to your post from TOD. You have mentioned some important points.

    IMO the coming collapse is inevitable, although it will only be called a collapse in retrospect. TV has destroyed attention span and our capacity to perceive changes in our environment to such an extent that we don’t notice anything anymore.
    Then there’s something that Jared Diamond mentions in his book called the “tragedy of commons” where in the competition for a scarce resource does not decrease but increases ten fold as crisis forces everyone to act in a manner that is beneficial for them but catastrophic to the society as a whole.

    Everyone keeps harping about how we switched from stone to wood and then wood to copper and iron and so on and so forth. But even back in those days it wasn’t like we were running out of stone or copper or iron, the age changed because something better was discovered, not because we ran out a resource or were about to run out of it. The current predicament more or less resembles what happened in Easter Island or the Maya or Rome and we know how that ended.
    Somehow I am reminded of the last scene from the Planet of the Apes.

    • You have some important points.

      We do not have a television in our home, and it bothers me to walk into a doctor’s waiting room and find the television on. I feel like it interrupts my thinking.

      Tragedy of the commons is a real issue and not being addressed. Many want to use more and more wood, but the earth really needs to keep some of its wood, to keep everything working together as nature intended. Also, what we are doing with biofuels is using up our natural gas and coal and topsoil more quickly, so as to be able to have more liquid fuels to burn. Politicians don’t see it this way. They think we are substituting it for oil, which we are “saving.” All the oil that is pumped will be used. Higher price won’t increase the amount of oil pumped by much, in any reasonable timeframe.

      • Ed Pell says:

        We have a TV but do not have access to any broadcast TV or cable TV. We do watch DVDs. I also find objectionable TVs in hospitals, doctors offices, restaurants, bars, etc…

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  4. Shunyata says:

    I agree, Gail, that the options are few but I would express them even more compactly.

    1. Force the population to save through increased taxation or reduced spending. Given the magnitude of our debt problem, a savings approach crashes the system.

    2. Share the burden between the population and investors through inflation or restructuring – in either case the population affords less real consumption and investors receive less real return. This is the current approach around the globe and preserves the system.

    3. Stiff the investors through outright debt repudiation. Repudiation crashes the system by definition.

    We will continue the current course until crashing the system is preferred to maintaining it. In that case, creditors prefer Option 1 while debtors prefer Option 3. The typical sequence is that the Powers That Be introduce Option 1, resulting in popular revolution and adoption of Option 3.

    I expect the same sequence here – which means that individuals cannot reasonably expect to maintain conventional wealth that is a product of the current system.

  5. Ikonoclast says:

    I am 57 and my late teenage children already say I grew up “in the old days.” I grew up in the 1950s and 1960s in Australia. It’s an interesting perspective and compression of perceived time. When I was a child, I did not see my parents’ childhood (1920s and 1930s) as the old days but rather I saw the 1800s as the old days. Yet, my mother still rode 5 miles to a bush school on a horse.

    Now, I really am beginning to feel like a person from the old days. More than anything, this is due to the oversized nature and over-use of automobiles. I am astonished by the size of vehicles (huge SUVs) which people think they need to own and by the amount of driving they deem necessary. But even my household exemplifies today’s problems, with 2 automobiles (at least not SUVs), 4 computers, 2 televisions, 3 mobile phones and an air-conditioner for one room.

    If my children have children and if this part of the globe is still at least semi-habitable, that new generation will do it tough. The old days will now be the rich, advanced, golden age from which the world has sunk and collapsed. Perhaps the people of the old days will also be reviled as the worst and most profligate users and destroyers of earth, nature and natural resources. More than anything they (that is us) will be correctly reviled for our greed, laziness, selfishness and lack of foresight.

    • Our children’s children may be as far removed from today’s society as your and my parents, and grandparents are removed from ours. My mother tells that their household got electricity when she was eight year old, and they used a horse drawn sleigh in winter, when there was snow. Things have changed a huge amount, in not very many generations.

  6. Bicycle Dave says:

    Hi Ikonoclast,

    I appreciate your general line of thinking and probably agree with all of your suggestions (especially the ones related to our car culture and military). The one topic you seem to have avoided is the unsustainable level of human population. It does not seem to me that any amount of alternative technology, efficiency, conservation or even “curtailment” (per Plan C book) can succeed in avoiding substantial collapse without very aggressive population planning measures (not implying genocide or other inhumane policies).

    Other folks here have commented that your suggestions could not succeed for a variety of reasons – too late, resource issues, unintended consequences, backlash, etc. I agree with you that a comprehensive plan could go a long way towards mitigating the worst consequences of our predicament. However, technical feasibility does not automatically translate to political reality. All of your suggestions necessitate the political will to plan and implement – and then modify as events unfold but never losing sight of the basic goals. I can’t foresee any possibility that the US citizens would elect politicians who would support your suggestions (other than a few outliers like me).

    I believe the fundamental problem in the US is cultural – the types of belief systems with which we are indoctrinated in the first few years of our life. These belief systems are then manipulated by powerful groups for their narrow interests – sometimes selfishly, sometimes with the best of intentions. Religions, corporations, political factions, and ideologies of all sorts engage in this behavior – there is no legal penalty for disinformation. As you mentioned “ USA’s ideological addiction to …..” A mega church collecting millions of tax-exempt dollars does not have to prove there actually is an afterlife that rewards their special beliefs about supernatural things; energy providing corporations do not have to support their claims about cheap and abundant energy for hundreds of years; politicians are almost expected to utter nonsense (like climate change is a hoax or “terrorists” threats require wars). The end result is a nearly total inability for rational and critical thinking about the really big issues facing mankind and the planet. The majority of US citizens (according to polls) don’t think evolution is true – they hold science to be just another “opinion” that doesn’t differ from religion. How can the facts and implications of FF depletion, climate change, species extinction, ocean acidification, deforestation, etc, be incorporated into the national dialogue when science is discounted and math is ridiculed?

    I don’t know if Gail is right with her time frame for collapse – the great majority of US citizens would strongly disagree. I hope she is wrong, but even if it is 20 years off, that is not much consolation for our grandkids. I would love to see your suggestions seriously considered by decision makers who are supported by the general population – I’m not sure what could bring this about.

    • Ikonoclast says:

      Bicycle Dave, I fear you are right. Quite frankly, seen from the outside, the USA now looks like a nation totally divorced from reality. It is bizarre and very frightening to watch. Some of the most disturbing foreign policies are (some official and some denied but fully documented and proven);

      1. Pre-emptive defence.
      2. Extreme rendition.
      3. Torture.
      4. Regime change.

      The USA has entirely lost its way at all levels.

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  9. Owen says:

    While I have many comments, I’ll restrict to what seems to be a particular expertise among those Peak Oil focused, that is I think I may be the only former military officer on these blogs commenting on the largely fringe extremism left wing perspective that is so often present.

    First, cut the military 50%. Long ago I happened to be assigned to provide a briefing, along with a naval and army officer, to some congress people, seat holders and staff both, of decidedly anti military persuasion. An invitation had been extended to explain very particular tactics and hardware use to those folks. There was to be no ideological component and certainly no political component to the presentation.

    They didn’t last past the third slide.

    There is a very powerful disinterest in the details on the part of those opposed. An explanation of ICBM velocities and timing of launch to coordinate with submarine launched weapons was the basis of why certain radars had to be funded. You have to see them coming. Those folks were tuned out by the third slide addressing over the horizon radar and satellite launch detection and why both needed confirmation.

    In that context, let me explain what 50% of military spending cut means. It means the President has no other options than nuclear when he’s faced with a crisis. The nuclear forces, strategic or tactical, are cheap. They cost almost nothing. Hardware generally never does. It’s salary that costs money. So when you say you’re cutting 50%, it means you’re grounding 3/4 of all fighter squadrons. You’re going to keep most ships in port. You’re going to put 3/4 of the US Army on the street.

    Then go down the list of obvious actions to, if not expect, at least see are more credible.
    1) China occupies Taiwan and takes control of all semi conductor factories.
    2) China immediately takes control of the Senkaku Islands south of Okinawa for the oil
    3) China immediately takes control of the various waters in dispute with Vietnam and Philippines for the oil
    For those three, don’t ask “why presume they are that abusive”, ask “what stops them from advancing their national interests?”
    4) Russia addresses the pipeline issues with Ukraine by informing them there is no further need for a Ukrainian government
    5) China’s influence in Sudan, north and south, asserts itself militarily, and they “negotiate” a reduced price for the oil flowing.
    6) Those Chinese troops “supporting” Bashir will move north to support Gadaffi and provide him with thanks for the oil development/operations contracts
    7) The Kara Sea drilling the Russians are doing will also move to explore the areas off the coast of Canada
    8) There will develop some conflicts in understanding of what leases in the Gulf of Mexico are to be drilled by PetroChina vs Royal Dutch Shell. Those misunderstandings will be resolved by presence of Chinese frigates supporting their legitimate national rights.

    Present a president with not all, but ANY of these scenarios. If all he has left are nukes, he has zero capacity for proportionate response.

  10. Ikonoclast says:

    Owen, it is interesting and revealing to get a military hawk’s response. I presume I may call you a military hawk? You might even consider it a compliment. Since you characterised my views and those like mine as “fringe left… extremism”, and your comments remain unmoderated (which I think is fair enough) then merely characterising you a “military hawk” should be considered a proportionate response.

    Let us go back to first principles. I assume you accept that a robust economy is required to support a robust military. I also assume you accept that there must be a practical maximum to the military budget of any nation, beyond which point the direction of resources to the military will so harm the national economy that, in time, the economy will be unable to support that level of military spending.

    We saw the above principle in action immediately before and during the collapse and disintegration of the Soviet Empire. I think we can also see this principle apply in the case of North Korea. No matter what political-economic system is under consideration (communist or capitalist) and no matter how highly or poorly productive that system is, we must accept that it cannot spend without limit on military needs and without regard to the health of the economy as a whole.

    In addition, with you being a person military background, I assume you understand the principle of strategic overstretch. A simple definition of strategic overstretch would be that a nation has gone beyond its economic and military capabilites in an attempt to project power strategically, especially in an attempt to achive regional or global hegemony. If the US had infinite power or even an overwhelming majority percentage of the world’s economic power, it might concievably aspire to achieve world hegemony with modern technology.

    The US share of world GDP (nominal) peaked in 1985 with 32.74% of global GDP. The US share now comprises about 25% of world GDP. There is clear evidence that the US is now suffering from strategic overstretch. The US have not won and cannot win the wars and occupations in Iraq and Afghanistan even after 10 years. The US economy is suffering badly from many factors, but one factor is the excessive military spending of these hopeless, objectiveless and geostrategically pointless wars.

    The US has a stark set of choices ahead of it. Continue the delusion that it can achieve global hegemony, continue over-spending on strategic overstretch and bankrupt and ruin the US economy or contract to a realistic (and still very powerful) regional defence posture whilst rescuing its economy and national debt from its current disastrous position.

    So in this context let me explain what cutting your military expenditure by 50% means. It means saving the US from total economic collapse. It means contracting from a delusional position predicated on maintaining global hegemony (while failing to defeat an insurgency in a third rate country). It means contracting to a realistic position of regional defence and saving the US economy from total disaster.

    The plain fact is the Chinese leadership is being far more geostrategically wise than the American leadership. The Chinese do not overreach. They simply wait for their opponents to overreach and topple themselves. In relation to your Taiwan example, I think your are over-stating Chinese capability. If taking a fortified island nation with naval (and now air) supremacy in the hands of the defenders and their allies was so easy then I guess both Napoleon and Hitler would have taken Britain.

    The US could reduce military spending by 50% by disengaging from the Middle East, North Africa and Europe. There is no need for US military bases in any of these regions. The EU must shoulder the whole burden of countering Russia. The Middle East and Africa can be also be left to EU influence if necessary. A realistic posture for the US is to control the Pacific and guarantee Japan, Sth Korea, and Taiwan.

    Please tell me how you think the US can save its economy and militarily police the whole world on 25% (and declining) of the world’s GDP. Do you really think this is realistic? Americans really need to take a big dose of realism. You are not infintely powerful, nor infinitely capable. Belief in maintaining US world hegemony is a delusion which will only do you harm and prevent the US from achieving good things that are realistically possible.

    • Bicycle Dave says:

      One again I find myself in agreement with Ikonoclast. I can only add a couple of thoughts.

      As a person who was drafted into the military for an eight year obligation, it may be understandable that I have a different perspective from Owen. It is always interesting to observe how the fringe extreme right-wing jingoistic perspective sees bombing as a potential solution for most international problems. TV coverage of the Iraq “Shock and Awe” should be viewed as a national disgrace.

      Perhaps the disinterest of those congress people is because they were more interested in alternative solutions to geopolitical issues than a detailed presentation on the esoteric aspects of constructing a hangman’s knot. The US military has experienced some outstanding achievements with humanitarian aid but far less with recent wars. It is quite astounding that we learned so little from the Vietnam War. How can anyone justify the Iraq War?

      I worry that our jingoism is actually making us more vulnerable to collapse. And yet, it is hard to see how we end our addiction to war making because every state in the union has huge military contracts that depend upon the need to produce more and more military goods and services. Obviously, this money and effort could be used for peaceful purposes – but, this transition is highly doubtful. Once again, it is fairly easy to see how our culture has been manipulated by vested interests to glorify war making and our “war fighters” as the media puts it.

      The world is a messy place and the human race has not moved beyond violent aggression as a way to solve problems. I realize we need a military but that does not mean we should abdicate civilian responsibility to develop a balance strategy for international relations – the “commanders on the ground” should be the last folks to develop that strategy.

      • Owen says:

        Let me offer up a reply to both you guys in one post.

        1) The left wing extremism label actually wasn’t pointed at you, Ikonoclast guy. I think I had just moseyed over from some other peak oil site where there was an array of folks angry about coal and electricity and oil and electricity, and who bristled in defense against statements like “Solar panels will not power a house”. They then pointed out that theirs does and has since 1943 or whatever, at which point someone challenges it and it becomes clear that it powers some light bulbs in their house but does not power baseboard heat or air conditioning or the fridge or any sort of deep freeze for mass food storage. Or they live in Flagstaff, which is about the only place in the US that might need no overt climate control. Those worshippers at the altar of renewables are simply math challenged.

        2) I went thru your post carefully, but I saw no comments in it at all concerning constriction of presidential proportionate crisis response, which was the only point I made.

        3) Be careful about cost quotes for deployments. They usually include salaries of all personnel deployed. Those people still get paid regardless of where they are stationed. If you want to slash force size, that is a decision that is region independent.

        4) DoD’s 2012 Administration request for budget is 707B. That includes overseas contingency ops. There are other peripheral costs like Veteran’s affairs (medical) which is 70B and Veteran pensions, another 55B, but in general the price tag for “the military” is 707B and the deficit is 1.5T. A 50% cut totaling 350B viewed against 1.5T (a mere 20%) and the overall 15T would not seem to support rhetoric like:
        “So in this context let me explain what cutting your military expenditure by 50% means. It means saving the US from total economic collapse.”

        5) As far as calling disinterest in tactical detail some sort of virtue, because it means people have more elevated thinking in their heads about the big picture whichness of what . . . let me acquaint you with a recent analysis of the Battle of Britain in the late 1930s. The conclusion is that Hitler, in a non moral sense, should have won. England had no oil. The North Sea fields were not yet discovered. It was all imported, and much from Iraq. If the German high command, and Hitler, had been thinking oil thoughts the way we do now, a fraction of the resources squandered in Russia could have been focused on oil interdiction. After a few months, no Spitfires would have gotten into the sky to oppose the Luftwaffe escorts of the eventual invasion force.

        But that’s not the point. The point is that following this analysis, some folks disinterested in military details waved it aside and pointed out that US bombers bombed the Germans’ Romanian oil sources and the eventual outcome would not have changed. German loss of resources and industry would have been decisive, as it was in reality, and moral superiority would triumph.

        Of course, the problem with that is that in 1944 there was no air to air refueling.

        The flights from England to Romania were just barely within range of Allied bombers. The range from, say, the Azores to Romania was beyond that of those bombers. Or from any other imaginable airfield. With England invaded and no airfields available to US bombers, that bombing campaign would never have occurred. Hitler would have won Europe, but this would have been irrelevant to those disinterested. They would postulate victory derived from morality.

        Kinda keep this sort of thing in mind as you shut overseas bases. There are only so many 45 year old KC135s around.

        • Ikonoclast says:

          In investigating any problem, it is important not to make a priori assumptions. To provide a quick definition, an a priori assumption is something you assume to be true without critical examination or empirical proof. A common error in philosophy, logic and argument (especially political argument) is to use an a priori assumption or assumptions to prove a subsequent point or provide a basis for a set of rationalisations which is really an ideological or faith position. In some cases, your a priori assumptions are merely unsupported, in other cases they are not only unsupported, they are refuted by empirical facts.

          The first issue to consider is AGW (Anthropogenic Global Warming) or climate change. The burning of fossil fuels (oil, gas and coal) releases large amounts of CO2 into the atmosphere. I am sure you aware of the arguments about AGW. Suffice it to say here, that scientific experts in the field have demonstrated to a high degree of probability that this global warming is occurring, is man-made in its current form and will lead to serious negative effects on the environment and our civilisation. Do you accept the validity of this argument? If you do not, I wonder this. Do you ignore the advice of scientific experts in the field of radar technology? I suspect not. On what basis do you selectively accept some expert scientific advice which is based on empirical evidence and repeatable, verifiable laboratory and field experiments and selectively deny and ignore other expert scientific advice which is based on using exactly the same rigorous scientific method?

          Fossil fuel resources are also finite. They are not only finite but our extraction of them is even now reaching the peak extraction rate possible. After this peak, there will be a decline. Along with the inadvisability of burning all fossil fuels, the fact is that they will run out in any case. Therefore we will have no choice but to go to renewables and make them suffice as best we can. I am not sure if you accept the anti-science and anti-empirical claims that AGW is false and that fossil fuels will never run out. If you do accept these arguments, then you have ignored the best expert intelligence available based on science and empiricism and succumbed to a disinformation campaign based on factors other than science and reason.

          If, on the other hand, you are prepared to accept what science tells us, then you are forced to consider what renewable energy sources may be able to do for us. Fossil fuels will run out and we must make do with renewables; it will be an enforced necessity. It is no good merely saying solar power or other renewables wont power this or that aspect of our high energy use life style. A statement like this is irrelevant compared to the empirical reality. Your statement really contains two inherent a priori assumptions. One is that the maths (or rather the physics) says it’s impossible and the other assumption is that our high energy use life style is non-negotiable and non-modifiable. Those who have actually done the maths and the physics have shown it will be possible to power part of our modern lifestyle by renewables but these possibilities are made problematic by over-population, transition problems, delays in taking action and the propensity to fight destructively over remaining resources.

          Owen, you said “I went thru your post carefully, but I saw no comments in it at all concerning constriction of presidential proportionate crisis response, which was the only point I made.” The problem is that you make have made a whole host of implicit, a priori assumptions in this one statement. Your first a priori assumption is that the USA’s capability (as a productive state) to provide the President with proportionate crisis response options is open-ended. It is not open-ended. There is a finite limit to the resources which the USA can provide for military spending without damaging its entire economy. Thus you reach a point where you must say, we would like to provide the president with more options, more capabilities but on a cost-benefit basis it is no longer justified. Domestic economic damage from neglect of civilian spending priorities will outweigh further diminishing returns (if any) of giving the President ever more numerous military response options.

          The second important a priori assumption you make, is that is possible, necessary, desirable and cost–effective for the President (and the USA) to continue to intervene militarily, in an ever expanding way, all over the planet. This is an a priori assumption which not only does the greater proportion of earth’s population disagree with, it is also an a priori assumption which disagrees with all the tenets and facts of geostrategy, grand strategy, enlightened self-interest of the USA and the economic and resource limits of the USA.

          The geostrategic reality is that US cannot create and maintain world hegemony for itself. The geostrategic reality is that the unipolar world some envisaged has not come about and cannot come about. The geostrategic, economic and political reality is that if growth patterns continue more or less as at present, China will soon become the number economic power. “Recently the International Monetary Fund confirmed what the average Chinese has long anticipated: China will soon have the world’s largest economy, surpassing the United States.” This is the IMF talking, not me.

          In trying to continually overreach militarily, in ignoring the imperative to create as good a renewable economy as possible, in ignoring diplomatic grand strategy and realistic regional zones of influence, the US will damage, not enhance, its prospects to remain a prosperous, just nation and a major world power.

        • Bicycle Dave says:

          Hi Ikonoclast,

          Excellent comment, especially your last paragraph. This is my major concern about our current international policies – that we are doing more harm than good with our exaggeration of military capability versus other options. Eisenhower warned about the “military industrial complex” – but we seem to have ignored his advice. I can attest to the power of this phenomena – here in Wisconsin we have contracts to build combat vehicles and it would be political suicide to argue against them. I really don’t know how we extract ourselves from this tar baby. I see very little in Owen’s arguments (and I believe he is very sincere and well meaning) that relate to our geopolitical strategy- it is all about getting government contracts.

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