Recipe for Collapse: Rising Military and Social Welfare Spending

Whatever you think of former Fed chair Alan Greenspan, he is one of the few public voices identifying runaway entitlement costs as a structural threat to the economy and nation. We can summarize Greenspan’s comments very succinctly:there is no free lunch. The more money that is siphoned off for entitlements, the less there is for investment needed to maintain productivity gains that are the foundation of future income generation: Greenspan: Worried About Inflation, Says “Entitlements Crowding Out Investment, Productivity is Dead” (via Mish)

Many people look to the rising costs of the U.S. military as the structural problem, and they have a point: there is no upper limit on military spending, and the demands (by the civilian leadership of the nation) on the services and the Pentagon’s demands for new weaponry are constantly pushing budgets higher.

But the truth is entitlement spending now dwarfs military spending: entitlements are more than $1.75 trillion, half of all Federal spending, while the Pentagon, VA, etc. costs around $700 billion annually.

We have a model for what happens when military and social welfare spending exceed the state’s resources to pay the rising costs: the state/empire collapses. The Western Roman Empire offers an excellent example of this dynamic.

As pressures along the Empire’s borders rose, Rome did not have enough tax revenues to fully fund the army. Hired mercenaries had become a significant part of the Roman army, and if they weren’t paid, then the spoils of war became their default pay.

This erosion of steady pay also eroded the troops’ loyalty to Rome; their loyalties switched to their commanders, who often decided to take his loyal army to Italy and declare himself Emperor.

Meanwhile, the costs of free bread and other foodstuffs and public entertainments (bread and circuses) exhausted the Imperial coffers. Originally intended to alleviate the suffering of the poor, the free bread program had expanded from feeding 40,000 citizens of Rome in 71 B.C. to 320,000 under Augustus–roughly one-third of the entire populace of Rome. (The free bread was by then augmented by free cooking oil and other goodies.)

(Source: page 85, Food in History)

Costly entertainments such as bloody gladiator fights that had once been staged on rare public holidays were commonplace by the late Empire, another drain on the state coffers.

Like all states under financial pressure, the Empire devalued its currency as a means of stretching sagging resources. A measure of wheat that cost 6 drachmas in the first century A.D. cost two million drachmas after 344 A.D.

How’s that for inflation?

Today, we face the same crunch: the costs of entitlements are outracing the economy’s ability to fund them. Entitlements already consume half the federal budget:

This is up from 20% in 1970. Going forward, they will only consumer more.

In nine years or less, the three primary entitlements of Social Security, Medicare and Medicaid and interest on the soaring federal debt will consume all federal tax revenues:

To pay for entitlements, federal tax rates will have to double: if you think the wealthy elites who benefit from the status quo are going to pay 80% of their income in federal tax, please read Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens

Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence.

No politico dares touch “the third rail” of American politics, entitlements. Since there’s no free lunch, it’s best not to even mention it, except to blather on about how “growth” will solve everything.

The Romans were not interested in facing the problem, either. Once the masses became dependent on the free bread, near-riots ensued when the grain shipments were late.

Leaders faced with unrest, rising demands and dwindling coffers always debauch their currency as the politically expedient “solution.” Our own Establishment is readying the “free money” of helicopter drops and printing money to subsidize federal deficits, willfully blind to the eventual destruction of the currency this will inevitably cause. (Even Greenspan admitted as much.)

Sadly, nations get the leadership they deserve. Turning a blind eye to reality is not a sustainable “solution.”

Here are two recent books on Rome worth reading:

The Rise of Rome: The Making of the World’s Greatest Empire

428 AD: An Ordinary Year at the End of the Roman Empire

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  • jo6pac

    This pretty simple. You cut military spending by 2/3. Then take the saving and spend on rebuilding Amerikas road, bridges, sewer system, water systems adding gray water system, rebuilding public school system, closing charter schools, and more. Stop the austerity from hell and privatizing of govt. This would employ millions of citizens that would be able to leave the so-called entitlement programs The triple SS and have Medicare for all from birth to death. Sadly the elite are taking us serfs over the edge.

    • Brockland A.T.

      The problem is, the Military-Intelligence-Financial Industrial complex isn’t geared to live within its own means, or even serve the needs of the U.S of A. Its in many ways a praetorian cult unto itself, described by commentator William Astore as the 51st state.

      So, the only question is, is this really a recipe for collapse, or the start of something really big (albeit one requiring the end of the rest of us…)?

      • tom

        Or, to put it simply, a cancer. A lethal cancer.

        • Brockland A.T.

          The cancer-industrial complex is a well-known enemy in some circles.

          In some eyes, one of Big Pharma’s first popular hits and classic example of antisocial crony capitalism, prioritizing profit by treatment over real cures, or at least, far less expensive treatments.

    • jadan

      The privatization of the national money system began with Hamilton and the constitutional mandate that gives the money power to the people’s government was never considered after the revolution except during the Populist movement of the late 19th. Smith never considers alternatives, which is the character of the hard money libertarian mindset. He never considers that the elite is responsible for the gross mismanagement of money and the entitlements they give themselves are the problem ( with military entitlement, of course ). The collapse of old Rome is not an object lesson except to those empires being invaded by barbarian tribes.

    • Nexusfast123

      You would need to clear out all the globalists and neocon degenerates. Terminate the global trade deals and eliminate the influence of Wall Street. Then switch the economy from one that is based on ‘financial planning’ to one that is based on ‘technology planning’. Terminate cheap labour visas and employ Americans.

    • Jim G

      One way to get them: Investigate 911. Seems possible now. Another way to get them – declare all the bond debt we accumulated since 911 to be “a fraud” and declare it invalid and irredeemable.

    • WeAreYourGods

      That’s all it would take, but unfortunately We The People are only subsidizers to the Deep State, the corporate/banking mafia that are attached to this nation like so many engorged leeches, just parasites killing the host without regard.

  • Fee-fi-fo-fum

    The good news it is almost over. When the collapse come a great cleansing will take place. All of the blood sucking leeches will have to find a new place to feed.

  • kimyo

    it’s inaccurate to portray medicaid/medicare as an entitlement. the primary beneficiary is bigpharma.

  • cstahnke

    This notion that the rise of Augustus ruined the Empire is ludicrous. The Western Empire survived for over three centuries after. At any rate, CHS is correct that entitlements are a major problem but CHS does not even imply a solution. First the US health care system like nearly all of our institutions is profoundly corrupt not just in the obvious ways but in its basic practice of medicine. Also, living I separate houses each with its mini economy needs to be changed to communal living for older people and not these assisted living situations either–true community and connection with others is the direction we ought to be going in anyway.

    • Nexusfast123

      Gets the cause wrong and does not offer a solution. The solution is to kill the current globalising trade policies and rebuild the economy via ‘technology planning’ and dump the financial rubbish from Wall Street.

  • Nexusfast123

    They always get the analysis wrong. Benefits growth is a consequence of a de-industrialised economy. No one wants to go on to benefits if they can get a decent job. The hollowing out of the economy under current policies will not be reversed. Productivity gains are a myth and irrelevant as what is use of being more productive if you are not competitive via the offering of competitive products. A vibrant manufacturing sector is important to the maintenance of an effective military. The other comments about the economy are correct as an increasing percentage of resources will go to try and maintain the empire. Want and see what happens when interest rates go up.

  • exomike

    Charles Hugh Smith, I would argue against your BS but unlike you I am unable to pull numbers out of my ass and make them into pie charts for the American Moronic Convergence to eat and throw at each other. The reality is that the Military Industrial, Intelligence, Police, Security and Prison Complex eats more that half of any real pie chart.

  • tom

    “In nine years or less, the three primary entitlements of Social Security, Medicare and Medicaid and
    interest on the soaring federal debt will consume all federal tax revenues”.

    Great news for the rest of the world! The USA will have to stop killing people abroad.

  • Jim G

    Did you see where all the wars we have been fighting since 2001 have been based in lies? Do you realize that all our modern weapons, which are electronic, may be obsolete? Imagine – trillions of dollars ($$$) of weapons turned to junk because they can’t fly missiles or ships into one of Russia’s “access denial areas,” which around Crimea includes most of the Black Sea. This is the military saying this. Look it up. Biggest thing to happen In the war. “The US is behind in electronic warfare.” The Russians, spending one tenth the money on the military beat the US in war games over both Syria and the Ukraine. Aircraft carriers? – just sitting ducks. What a waste of money.

  • WeAreYourGods

    I take some issue with the idea that military spending is actually 700 billion, we need to include black budget dollars as well as foreign military aid in the equation to get a real picture of the cost of the military industry’s corporate welfare state.

  • exomike

    The problem is not entitlements. The problem is the un-taxed non productive economy of which Wall Street is the prime example. They have too much money and they have bought the government. The irony is that here we have a people, armed to the teeth and yet they are being robbed blind by the Banksters but blame the poor for their problems.

    I for one am over this democracy thing. With mass media and modern propaganda techniques it just can’t work. The chickens keep will keep voting for Col. Sanders.

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