American military, despite accolades, has huge problems

James Fallows, whom I've been reading faithfully for nearly 40 years, has an absolutely devastating indictment of America's defense establishment in this month's Atlantic magazine. The long article begins with America's recent adulation of everyone in a U.S. military uniform or anyone who's ever served (i.e., veterans) and goes on to critique the military procurement system and a military hierarchy that takes care of its own.

More than a year ago, I complained that veterans or current military personnel were being hailed as "heroes," regardless of their type of service. I have been offered the same rewards — free meals on Veterans Day, a preferred parking space at the grocery store, and thankful compliments when asked if I was a veteran — as men who faced combat. But my military commitment was fulfilled by sitting behind a desk and answering correspondence from parents, spouses and members of Congress. At no time did I face hostile fire. My most hazardous moment was probably when I was urged by war protesters to take off my uniform and join the anti-war movement on the streets of Washington, D.C. I just walked on by.

More than 50 years ago, President Eisenhower warned America of a "military-industrial complex" that sought not the best military might for America but the best profits for themselves. Fallows documents just how much worse things have gotten since Eisenhower's 1961 farewell address. He makes the point that military weapons procurement has less to do with military weapons and more to do with spreading economic stimulus packages throughout the country. Thus, the ideal weapons system — an aircraft carrier, bomber or fighter jet — is one that has subcontractors in every congressional district in the country, thereby ensuring that Congress will approve the system, regardless of costs, cost overruns, or effectiveness of the weapon.

The F-35 fighter jet is the latest iteration of this economic-stimulus-as-defense package. It will be the most expensive airplane ever, and it can't do what it is supposed to do. An accompanying article in the Atlantic laments the inferiority of the U.S. M-16 combat rifle and its later versions, such as the M-4, compared to the AK-47, which has been used by the Soviet Union, China, Cuba and other countries for more than 50 years. The M-16 is a more complex, harder to maintain and more likely to jam weapon than the AK-47, which is simpler, easier to maintain and is less likely to jam. But America has been using the same basic, inferior rifle for more than 40 years.

Fallows points out that since World War II, American soldiers, the best supplied and most expensive (by far) army in the world, have lost again and again against less-sophisticated, poorly supplied and poorly trained enemies in Korea, Vietnam, Iraq and Afghanistan. The military-industrial complex needs to be shaken up, beginning with Congress and then with the officer corps, before greater damage is done to the nation.

The military's problems need to be part of the presidential debate and congressional campaign issues, but as long as Americans believe everyone in a uniform is a hero and above criticism, that can't happen. A good starting point would be for every member of Congress and every candidate for Congress or the presidency to read Fallow's article.

Payroll tax exemption could boost economy

This Labor Day weekend, there are about 15 million Americans who are unemployed, and job growth is stagnant as economists predict the possibility of a "double dip" recession or a slowdown that lingers for years and years. In his Saturday radio address, President Obama pledged to place renewed emphasis on the economy and jobs. In times like these, Americans expect more from their presidents than they can deliver and blame them for more than they have caused. Both Presidents Bush found themselves blamed for economic problems they didn't create and couldn't solve, the same dilemma Obama is in now.

The economic stimulus Obama proposed had a positive effect on the economy, most economists agree, but could not overcome the many underlying problems. So jobs are still hard to come by, and the housing market has not recovered. Talk of a new stimulus is being viewed skeptically by voters and by members of Congress. Unease over budget deficits and the federal debt is affecting the debate over the expiration of Bush tax cuts and the over any new economic initiatives.

So what's the answer? Robert Reich, who was President Clinton's secretary of labor, is proposing an appealing new approach. Reich points out that 80 percent of Americans pay more in payroll taxes (which fund Social Security and Medicare and are applied to the first dollar earned) than they do in income taxes (whose deductions and exemptions ignore the first several thousand dollars of income). He proposes a one-year moratorium on payroll taxes for the first $20,000 of income. This would be offset by applying the payroll tax to incomes above $250,000. Under current law, the payroll tax ends at $106,000 in income. Reich says his proposal would be revenue neutral — the loss of revenue from lower-income workers would be replaced by revenue from those earning more than $250,000 in salaries.

His plan would increase consumer spending because workers would see all of their first $20,000 in income in their paychecks, not the $18,470 they now receive after payroll taxes are taken out. Employers would also save $1,530 on the first $20,000 in salaries they pay their workers, and that would make it cheaper to create new jobs and hire workers. Companies with employees earning over $250,000 would take a hit on the employer match for those workers, but nearly all companies would come out ahead.

It sounds like a solid plan to me. It would have no net effect on Social Security and Medicare, and it would almost certainly put an economic boost into the hands of consumes and small businesses. Why limit it to one year?

Stimulus today, federal debt tomorrow

News reports today say that President Obama has rediscovered the federal budget deficit, and he's going to promise to do something about it. Good for him.

There has been little discussion of the budget deficit or how our grandchildren will repay all this money as Congress has debated the stimulus package. We are now looking at annual budget deficits in excess of $1 trillion! Remember all the grief Ronald Reagan took when deficits under his watch reached $100 billion? Several times that amount has disappeared into the banking system in the past six months, and no one seems to know where it has gone.

Obama says he wants to cut the deficit in half by the end of his current term. If that promise sounds familiar, it should. George W. Bush expressed the same wish, and I seem to recall Reagan and George H.W. Bush making the same or a similar promise. Funny thing about cutting something in half: You can cut by half for 50 years, and you never quite get rid of it. Still, it's a starting point.

Few economists fault Obama's push for federal spending to bolster the feeble economy. Now, they say, is not the time to worry about deficits. But we will need to worry about deficits sometime, and Obama deserves some credit for bringing up the topic now. After spending trillions of dollars salvaging banks and boosting the economy, cutting the deficit will be difficult.

Obama is calling a meeting this week to discuss long-term budget problems, which includes the long-term insolvency of Social Security and Medicare. Democrats, whose campaign rhetoric denied any problem with Social Security's finances, have to tackle this issue. George W. Bush's futile effort to shift SS investments to the stock market never got going, and all Americans are now grateful for that, since the market has lost nearly half of its value in the past year or so. The federal deficit is greater than usually acknowledged because Social Security revenues now mask the depth of the deficit.

The nation's long-term fiscal health depends upon finding a solution to the Social Security and health care problems. The federal debt has now topped $10.8 trillion, which is more than two-thirds of the gross domestic product of around $14 trillion. Annual payments on that debt are around $500 billion, nearly as much as the Defense budget. As a nation, we cannot sustain this forever. Obama is right to address the deficit issue now and to think ahead about how we are going to get our spending back into balance and thereby provide for the economic growth we and our grandchildren will need.

Stimulus package holds no guarantees

The stimulus package that seems to be picking up some steam on Capitol Hill is a major gamble at best. Its nearly trillion-dollar federal spending package is intended to boost the foundering economy, but there is no certainty that the pump-priming, Keynesian model will work under these unique circumstances. Its only real certainty is that future generations will be paying off this debt of borrowed money.

But Congress and the president are loath to do nothing. No one wants to be accused of sitting idly by while the economy collapses. So the two different spending bills passed by the House and about to be passed by the Senate do something, but there are doubts whether they will do enough or do the right things. Republicans and conservative Democrats trimmed the Senate's spending in an effort to reduce the gargantuan borrowing, but critics say the items trimmed are among the most stimulative in the original bill — aid to states for infrastructure projects and additional aid for the unemployed.

I find it baffling that tax cuts remain in this bill. After eight years of GOP tax cutting, which contributed to record budget deficits, we're still pushing for more tax cuts? For an element of the Republican Party, tax cuts are the panacea for all problems, economic and political. While I am sympathetic to the notion of reducing government's share of the economy and agree that a severe recession is no time to be raising taxes, additional tax cuts seem at this time illogical and ineffective. Last year's tax rebates did almost nothing to stimulate the economy. More tax cuts are likely to be hoarded by wary consumers worried about their jobs as unemployment rises unabated.

After months of effort to fix the economy, the basic problem — unpaid mortgages on houses with declining values — remains. Last year's original rescue plan was supposed to buy up those "toxic assets" and allow banks to begin lending again. But former Treasury Secretary Henry Paulson decided to invest the money directly into the banks themselves, not into their bad debts. But just like the consumers who hoarded their tax rebates, banks hoarded the federal cash and tried to ride out the downturn. New Treasury Secretary Timothy Geitner is promising a new attack on those "toxic assets."

One tax cut in the Senate package has been called the $15,000 house flipper bonus. In an effort to stimulate the real estate market, it would provide a $15,000 tax break to anyone who buys a house. You don't have to be a CPA to figure out that you can buy any old house, sell it the next week for $5,000 less than you paid and still come out $10,000 ahead. Let's hope this example of wrong-headed legislating doesn't make it into the final bill.

Congress is eager to get something done, and most Americans are all for taking action to fix the economy. Unanswered questions remain: Will this package be enough? Will the economy take the medicine that is being offered? Will this unimaginable amount of money be spent wisely? Will the economic stimulus do enough good to offset the inevitable pain of having to repay this money in higher taxes or higher inflation in years to come?

Nobody really knows the answers to these questions now.

Stimulus package an opportunity for N.C.

Some state officials are excited at the prospects of an infusion of federal money to jump-start state and local projects, particularly construction, repair and maintenance of highways, bridges and public transportation. President-elect Obama has indicated he wants to see a stimulus package that would provide money to the states to create 250 million jobs. That has state officials salivating. North Carolina, which had fared fairly well with its budgets for the past few years and had increased state spending, is now facing a money shortage. As the News & Observer states, the state has more "wants" than it can afford.

There are plenty of projects that could use a boost from the federal stimulus package. Recurrent proposals to turn Interstate 95 into a toll road should be shelved, and repair and upgrade of the vital north-south corridor should get top priority from federal money. I-95's sad state (just drive through Johnston County; I dare you) is the result of years of negligence as money went to more populous areas and to pet projects of powerful politicians.

Likewise, the Interstate 540 loop around Raleigh is being held up with plans on the table to make the southern portion of that loop a toll road. Raleigh residents, naturally, are not happy about the prospect. If the federal money comes through, North Carolina would have a good reason to drop the entire N.C. Turnpike Authority, which is pushing a number of toll roads across the state.

North Carolina once had a proud tradition of excellent roads and highways. No more. North Carolina's roads are visibly and tangibly inferior to roads in many neighboring states. A federal stimulus package for improvement of highways could give North Carolina the opportunity to regain its title as The Good Roads State. That will happen only if Congress finds the money to create the package with a minimum of specified projects and if state officials don't divert the federal money to wasteful pet projects.