Keller and Krugman

In “Honey, I Shrunk the Pentagon” Mr. Keller says what’s good for the deficit can also be good for national security.  Prof. Krugman, in “The Twinkie Manifesto,” says we can learn a lot from the 195os.  Here’s Mr. Keller:

Let’s imagine you are the new secretary of defense, and, wow, has Secretary Panetta left you a full docket. You have to extract more than 60,000 troops from Afghanistan without leaving behind a Mad Max dystopia. You have to carry on shadow wars against homicidal extremists, refine contingency plans for Syria and Iran, keep an eye on China’s pushiness and Pakistan’s fragility, all without being too distracted by the frat-house antics of hormonal generals.

It’s easy to overlook in all that excitement, but your best opportunity to make a major contribution to the security of your country is none of the above. It is the unglamorous, unpopular, unfinished business of right-sizing our defense budget, without putting us at grave risk. What’s that you say? You’d rather go back to reading General Petraeus’s flirty e-mails? I sympathize. Imagine trying to get people to read a column about the budget.

Yet here you are with a historic opportunity to push the “Refresh” button on our national security. One long ground war is over, another is ending, and there is no prospect of (or stomach for) new wars of occupation. No new cosmic threat has arisen, much as hawks have tried to promote China, our biggest lender and one of our biggest trading partners, into that role. And, to cap it all, your budget is headed for that dread fiscal cliff. In the absence of a budget bargain between Congress and the president, half of the automatic spending cuts that take effect in January will come from your domain — almost 10 percent applied evenly across all accounts. This is widely viewed with alarm by military experts in both parties who see it, rightly, as budgeting by meat ax. So, then, what’s the alternative?

This country accounts for more than 40 percent of the money spent on defense worldwide. We spend as much as the next 14 countries on the top-spender list, combined, and most of them are American allies. And that’s just the Defense Department. It doesn’t include the Energy Department’s nuclear weapons program, the C.I.A.’s drone franchise, the NASA satellites, the benefits provided by Veterans Affairs, and so on.

For defense conservatives, reinforced by members of Congress whose constituents build ships and aircraft, there is no such thing as enough. The determination to maintain our commanding position in a dangerous world is inflated by the clout of arms makers and sanctified by our civilian reflex to call everyone in uniform “hero.” (No one who actually wears a uniform does that.)

For liberals, the defense budget is invariably too much, a deep aquifer of wealth that should be tapped to quench our domestic thirsts. When liberals are in power, though, they tend to recoil from serious cost-cutting, partly for fear of seeming weak, partly because no one wants to be picketed by the shipbuilders’ union, but largely because, from where a commander in chief sits, the world is a genuinely scary place. In his re-election campaign, President Obama was largely silent on military spending, except for his sarcastic retort about bayonets and horses when Mitt Romney complained that we have fewer battleships than we used to.

But the economic crisis has chipped away at Defense’s defenses. Early this year, in conformity with a budget directive from Congress, Panetta proposed a budget that would cut $487 billion — about 8 percent — from planned defense spending over 10 years. The fiscal cliff, known to defense wonks as “sequestration,” would cut an additional $492 billion.

Most of the experts I follow think defense can be safely cut below Panetta’s level. How much? David Barno, a retired Army lieutenant general, and his colleagues at the Center for a New American Security last year laid out four increasingly severe budget-cutting scenarios in a very readable and, to my mind, credible report called “Hard Choices: Responsible Defense in an Age of Austerity.” Barno told me he could live with the second option (“Constrained Global Presence”), which cuts between $150 billion and $200 billion deeper than Panetta over 10 years. Barno estimates that additional “tens of billions, conservatively” could be saved by tightening the generous health and retirement benefits for military personnel and reforming the way we acquire new weapons. The bipartisan Simpson-Bowles fiscal commission recommended cuts in the same range. A new report from a defense panel assembled by the Stimson Center says that if the military is given flexibility to apportion the cuts where they will do the least harm, we can cut $550 billion — about the same amount as sequestration — “with acceptable levels of risk.” The centrist think tank Third Way recommends the same. These people are not reckless anti-military types or Ron Paul isolationists.

None of these cuts would absolve us of the need to grapple with the unsustainable growth of entitlements and to raise tax revenues. But making defense pay its share would make those other economies less painful. And after all, as Adm. Mike Mullen, former chairman of the Joint Chiefs, was fond of saying, “The single biggest threat to our national security is our debt.”

Budget discipline might finally force the Defense Department to make strategic choices and systemic reforms that are worth doing on the merits. Over the years, think tanks within the military and without have produced an immense, rich literature on how to make prudent sense out of austerity.

Almost everyone starts with a significant cut in active-duty ground forces and the heavy vehicles and artillery that go with them. Keeping America and its allies safe these days depends more on our formidable array of ships, aircraft and precision-guided munitions, plus small units of highly trained special ops and drones to combat terrorist cells. With the cold war over, we can afford to slash nuclear arsenals without diminishing our deterrent.

On a tighter allowance, the services might learn to behave as if they were playing for the same side. “All four services currently operate their own air forces, with limited sharing of aircraft,” the Barno report reminds us. The smallest service, the Marine Corps, has more tanks, artillery and fixed-wing aircraft than the entire British military. The services have a multiplicity of headquarters, on the principle that generals have to command something.

Our military should invest heavily in research and development of breakthrough technologies, like unmanned aircraft, but resist the lure of gold-plated, highly specialized weapons that often overpromise and don’t deliver. The Pentagon should curtail the practice of no-compete contracts. Frank Hoffman a senior research fellow at the National Defense University, recalled that he recently replaced a stolen Sony computer with the same model for half the price and got double the battery life. “That does not happen in the defense business,” he wrote. “We replace airplanes, helicopters and trucks at five times the cost, and buy far fewer because of it.”

None of this is new thinking. The last secretary of defense who called for a postwar transformation of the military was Donald Rumsfeld. He arrived at the Pentagon in 2001 for his second tour with an insider’s understanding of the system, a C.E.O.’s impatience with inefficiency, and an awareness that the end of the cold war presented a different world of threats. He was not a budget-cutter, but he wanted the money spent well. Before his good intentions got lost in the slogs of Afghanistan and Iraq, he railed at the interservice rivalries, the waste, the reluctance to give up anything or think afresh.

About four months into the job he dashed off one of his famous notes: “It is hard to imagine how a collection of such talented, intelligent, honorable, dedicated, patriotic people, who care about the security of the U.S. and the men and women of the armed forces, could have combined to produce such a mess. And yet, they conclude that nothing should be done to clean up the mess.”

Maybe now they’ll have no choice.

Right.  Sure.  When pigs fly, so keep an eye out for bacon in the branches.  Here’s Prof. Krugman:

The Twinkie, it turns out, was introduced way back in 1930. In our memories, however, the iconic snack will forever be identified with the 1950s, when Hostess popularized the brand by sponsoring “The Howdy Doody Show.” And the demise of Hostess has unleashed a wave of baby boomer nostalgia for a seemingly more innocent time.

Needless to say, it wasn’t really innocent. But the ’50s — the Twinkie Era — do offer lessons that remain relevant in the 21st century. Above all, the success of the postwar American economy demonstrates that, contrary to today’s conservative orthodoxy, you can have prosperity without demeaning workers and coddling the rich.

Consider the question of tax rates on the wealthy. The modern American right, and much of the alleged center, is obsessed with the notion that low tax rates at the top are essential to growth. Remember that Erskine Bowles and Alan Simpson, charged with producing a plan to curb deficits, nonetheless somehow ended up listing “lower tax rates” as a “guiding principle.”

Yet in the 1950s incomes in the top bracket faced a marginal tax rate of 91, that’s right, 91 percent, while taxes on corporate profits were twice as large, relative to national income, as in recent years. The best estimates suggest that circa 1960 the top 0.01 percent of Americans paid an effective federal tax rate of more than 70 percent, twice what they pay today.

Nor were high taxes the only burden wealthy businessmen had to bear. They also faced a labor force with a degree of bargaining power hard to imagine today. In 1955 roughly a third of American workers were union members. In the biggest companies, management and labor bargained as equals, so much so that it was common to talk about corporations serving an array of “stakeholders” as opposed to merely serving stockholders.

Squeezed between high taxes and empowered workers, executives were relatively impoverished by the standards of either earlier or later generations. In 1955 Fortune magazine published an essay, “How top executives live,” which emphasized how modest their lifestyles had become compared with days of yore. The vast mansions, armies of servants, and huge yachts of the 1920s were no more; by 1955 the typical executive, Fortune claimed, lived in a smallish suburban house, relied on part-time help and skippered his own relatively small boat.

The data confirm Fortune’s impressions. Between the 1920s and the 1950s real incomes for the richest Americans fell sharply, not just compared with the middle class but in absolute terms. According to estimates by the economists Thomas Piketty and Emmanuel Saez, in 1955 the real incomes of the top 0.01 percent of Americans were less than half what they had been in the late 1920s, and their share of total income was down by three-quarters.

Today, of course, the mansions, armies of servants and yachts are back, bigger than ever — and any hint of policies that might crimp plutocrats’ style is met with cries of “socialism.” Indeed, the whole Romney campaign was based on the premise that President Obama’s threat to modestly raise taxes on top incomes, plus his temerity in suggesting that some bankers had behaved badly, were crippling the economy. Surely, then, the far less plutocrat-friendly environment of the 1950s must have been an economic disaster, right?

Actually, some people thought so at the time. Paul Ryan and many other modern conservatives are devotees of Ayn Rand. Well, the collapsing, moocher-infested nation she portrayed in “Atlas Shrugged,” published in 1957, was basically Dwight Eisenhower’s America.

Strange to say, however, the oppressed executives Fortune portrayed in 1955 didn’t go Galt and deprive the nation of their talents. On the contrary, if Fortune is to be believed, they were working harder than ever. And the high-tax, strong-union decades after World War II were in fact marked by spectacular, widely shared economic growth: nothing before or since has matched the doubling of median family income between 1947 and 1973.

Which brings us back to the nostalgia thing.

There are, let’s face it, some people in our political life who pine for the days when minorities and women knew their place, gays stayed firmly in the closet and congressmen asked, “Are you now or have you ever been?” The rest of us, however, are very glad those days are gone. We are, morally, a much better nation than we were. Oh, and the food has improved a lot, too.

Along the way, however, we’ve forgotten something important — namely, that economic justice and economic growth aren’t incompatible. America in the 1950s made the rich pay their fair share; it gave workers the power to bargain for decent wages and benefits; yet contrary to right-wing propaganda then and now, it prospered. And we can do that again.


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