President George Bush called on Americans to face up to “”new realities” in proposing a huge increase in defence spending. The new realities are presumably the world after September 11. Those realities mean that the US must spend more on defence if it is to pursue its stated aim of hunting down those responsible for the New York and Washington attacks and bring to book those regimes that harbour them.
But the other compelling reality – that the increased defence spending must be paid for by somebody – has been ignored by President Bush. Far from facing up to that reality, he postponed it.
Mr Bush appears to have got agreement with the Democrats to increase defence spending by the amounts he proposes – an increase of the equivalent of $A95 billion in fiscal 2003 with increases over the next five years to put annual defence spending at $A887 billion by 2007. The Democrats may argue around the edges on what precisely it might be spent on, but it will still benefit the big defence contractors. At 12 per cent, it will be the largest build up on defence for 20 years. Mr Bush also proposes to double spending on homeland security to $A74 billion.
In the face of the September 11, the increases have some justification – though it might be preferable to spend more on the causes of terrorism – poverty, inequality, lack of education and health services – rather than concentrating on combating it when it is too late.
The real problem with Mr Bush’s proposals, however, is not the extravagant over-reaction with defence spending, but the way he proposes to finance it. He proposes to cut a wide range of domestic programs in education, welfare, health, job-training and scientific research. Further he will continue to push ahead with tax cuts, mainly for the already rich. The tax-cutting plan will cost about $A677 billion. The justification for the tax cuts is that the economy needs stimulus. That justification, however, no longer holds. For a start, the US is showing signs of economic resurgence without the cuts. Further, the huge boost in defence spending will provide an economic stimulus of its own.
The big defence contractors, those earning well in employment, beneficiaries of large deceased estates and double-income families will not have to face up to the ”new realities” – they will all be financially better off. Those having to face up to the “”new realities” with be those who need government help and the next generation which will be saddled with a legacy of debt caused by unproductive, destructive military spending – the sort of spending whose product becomes obsolete quickly.
The US was on a path to reduce government debt. The Bush budget will increase that debt over the next five years, but by then Mr Bush will not longer be in the White House and someone else will have to deal with the problem.
Another downside of the new US deficit budgeting and running up government debt will be its effect on the world economy. As we saw when President Reagan pursued similar policies in the 1980s – high deficits driven by defence spending and tax cuts – economies elsewhere get driven into recession as interest rates in the US drive up interest rates elsewhere in the world.
Mr Bush’s Budget priorities – away from humans in need to spending on the rich and the military – are a recipe for increased human misery in the world, and there is no guarantee that the war on terror will be any more successful with less military spending and more on the causes of terror.