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Back to issue 28

International Socialist Review Issue 28, March—April 2003

Guns vs. Butter

HOUSE SPEAKER Dennis Hastert recently responded to a question regarding the cost of a war with Iraq by saying, "If you have to pay for guns, you can’t pay for all the butter." This sums up the fiscal policy of the Bush administration.

After years of federal budget surpluses, massive increases in military spending combined with tax reductions for the top 1 percent of income earners is translating into a federal deficit that could rise at the rate of $260 billion a year. According to the Center on Budget and Policy Priorities (CBPP), "a third of the deterioration in the budget is due to the tax cuts. Without the tax cuts, surpluses would return in 2004."

And while military contractors and the rich get handouts, the poor get cutbacks in essential services. As a percentage of the Gross Domestic Product (GDP), funding for domestic programs like job training for the unemployed, child care and education for poor children and maintenance and repairs to public housing will decline drastically under the 2004 budget. On the other side of the ledger, the top 1 percent of income earners will gain $28 billion. "Of that amount," according to the Urban-Brookings Tax Policy Center, "$18 billion would go to households that make more than $1 million a year—the top 0.2 percent of households—or an average tax cut of $90,000 apiece in 2003."

Slashing needed services

Here are some examples of cuts already made for 2003:

• Job training programs for dislocated workers and youth—down $684 million;

• Head Start reduced by $395 million;

• Child Care and Development Block Grant, which assists poor working families in paying for child care while adults are at work will be cut $61 million below 2002 level;

• Funding for public housing, including repairs, energy assistance and security are to be cut by $305 million;

• Funding for health resources and services for poor people including care for HIV and AIDS patients have been cut by $172 million.

Overall, programs for low-income families and individuals, other than education programs, have been cut by $2 billion. This is 4.2 percent below a minimum baseline recommended by the Congressional Budget Office.

Bush’s cuts endanger the health and lives of the most vulnerable. For example, because Congress failed to provide adequate funds for the State Children’s Health Insurance Program (SCHIP), 900,000 children will lose health insurance over the next three years. Nor could the "compassionate conservative" Bush find room in his $2.2 trillion budget for an after-school program that benefits 500,000 children.

There are 800,000 workers whose unemployment funds have expired. These workers will join the growing list of those left behind by the Bush administration. Because they will no longer show up on unemployment lists, they fall out of the official unemployment statistics, making the 5.8 percent official unemployment rate well below the actual percentage of unemployed workers.

Not content to rob the social service budget for military spending, Bush is preparing to rob Social Security, too. He has proposed diverting more than $1.4 trillion of the Social Security Trust Fund to pay for programs through 2013. This robbery of the retirement benefits of working people will produce a crisis by 2016, when expenses will begin to exceed revenues according to the Social Security trustees. If new funding is not secured, Social Security will be exhausted by 2038.

State budget crisis

Bush’s tax proposals will also take money away from the states. There are 11 tax proposals in the Bush budget that will translate into a $64 billion loss to states over the next 10 years. Combined with tax cuts already in place, it will cost states $75 billion from 2004&-13. At a time when states are facing major budget crises, Bush has simply turned his back on them.

According the CBPP, state budget deficits currently exceed $50 billion, and are likely to reach $70-85 billion in fiscal year 2004 (which begins July 2003). This is the largest budget gap in half a century—twice as wide as in the early 1990s. California’s projected budget shortfall is the worst, at $18-26 billion, followed by New York state, with a projected shortfall of $10-12 billion. The budget crisis began to hit during the most recent recession, but has been exacerbated in many cases by tax cut programs that have transferred wealth to high-income voters on the assumption that the Goldilocks economy (not too hot, not too cold) would continue to ensure unlimited funds.

As with the federal budget, it is the poor and working class who are paying. The cutbacks are coming fast and thick—exacerbated by the fact that states are required by the Constitution to balance their budgets (although this often acts as a convenient excuse for any cuts states want to push through).

Already grossly inadequate health care system provisions are on the chopping block. According to a new CBPP report, "in 11 states where specific health care cutbacks have already been approved or proposed, one million people currently covered by Medicaid and the State Children’s Health Insurance Program—the majority of whom are working-poor parents—will be forced into the ranks of the uninsured if the cuts are fully instituted."

• In California, proposals for cuts issued by Governor Gray Davis will eliminate health care coverage for almost 300,000 families that have incomes between $9,160 and $15,000, as well as 200,000 families with even lower incomes;

• Planned cuts in Tennessee will eliminate health care coverage for between 160,000 and 250,000 adults and children;

• The near elimination of Oklahoma’s SCHIP, along with other cuts, will deny health coverage to 80,000 people with disabilities who live below the poverty line;

• As a result of a series of cuts implemented in early March 2003, 100,000 people will lose coverage for mental health, drug and alcohol treatment and adult dental care in Oregon. These cuts will deny medications to thousands of schizophrenics, manic-depressives, drug addicts and others who are poor and have no health care.

A March 4 New York Times article revealed the human costs of these cuts:

"I’m just numb; I don’t know what to do," said Mr. Cesario, who lives with his disabled wife and 12-year-old son. "My only hope is that the drug companies will have mercy and I’ll be able to get some free samples."

For Karen Hansen, 50, who has prescriptions for everything from anxiety disorder to high blood pressure, the cutoff means taking only the few drugs that will keep her alive. She lives on $689 a month in Social Security disability payments, and her monthly prescription bill, without assistance, is $615.

"I don’t buy the newspaper, I eat hot dogs that they give out free and get other meals from the food bank," Ms. Hansen said. "But that only saves about $200."

States are also making deep cuts in education. While Bush was delivering his State of the Union address, the governor of New Jersey announced he was cutting state funding to universities and colleges by 10 percent. Connecticut has laid off 3,000 state workers and plans to cut 1,000 more. Many Oregon school districts are proposing to cut the school year by 24 days to meet a $244 million shortfall. Hank Armstrong, father of an elementary school student in Oregon, told National Public Radio’s Gretchen Lehmann that budget cuts for schools is doing serious damage. "You know, we’ve cut away the meat, now we’re cutting into the bone, and there’s not much left." Oregon teachers know. They have given up $14 billion in wage and benefit concessions since 1994 to keep their health care. Now the teachers’ union has signed a two-year contract that commits teachers to working 10 days without pay and accepts a 5 percent pay cut. These examples could be multiplied dozens of times in almost every state, and they will continue. Oregon has already made $600 million in budget cuts, and plans to make an astonishing $2 billion more over then next budget cycle.

Guns and more guns

Deficit spending used to be anathema to Republicans. But when it comes to the military, no deficit is too large. Without factoring in the cost of a war with Iraq, the military budget request for 2004 is $399.1 billion. The Center for Strategic and Budgetary Assessments estimates that the Bush military budget is 13 percent higher than the Cold War average in real terms (though not as a percentage of the budget). This isn’t including the estimated costs of the invasion of Iraq, which range from $30&-95 billion in additional money yet to be requested by the administration. Yale economist William Nordhaus estimates an additional $300 billion will be needed to "secure" Iraq over two years of occupation.

The largest single program is for missile defense—$9.1 billion. An additional $14 million is requested for a "space test bed" to deploy weapons in space for the first time. By 2035, the estimated cost of this program is $1.2 trillion. Other military procurement requests include: $260.2 billion for B-2 bombers; $226.5 billion for Joint Strike Fighter aircraft; $69.7 billion for F-22 Air Force Raptor planes; $46.2 billion for V-22 Navy Osprey aircraft; $66 billion for Navy AEGIS destroyers and $61.8 billion for research and development.

Before the Bush administration began to ratchet up military spending in 2001 with its request for more outlays on missile defense, the U.S. military budget was already 19 times larger than the combined military budgets of the "rogue states" of Cuba, Iran, Iraq, North Korea, Libya, Sudan and Syria. While global military spending declined from $1.2 trillion in 1985 to $785 billion in 1998, the U.S. share of total spending increased from 30 percent to 36 percent in the fiscal year 1999. By the year 2009, the Council for a Livable World estimates that the military budget will be near $503 billion—enough to fund all medical, education and housing programs with billions to spare.

The priorities of capitalism

Not everyone is suffering. Military contractors, politicians and CEOs are not suffering. On the contrary. A study by Bloomberg columnist Graef Crystal found that CEOs at 31 major companies that reported losses averaging 10.7 percent in 2002 increased their total executive compensation by 9.3 percent. John Horne, CEO of Navistar (whose total "compensation" for 2001 was over $2.8 million, not including his $2.7 million in unexercised stock options), increased his base salary, total cash compensation (base salary and bonus) and total pay by, respectively, 9.2 percent, 9.2 percent and 146.1 percent. In other words, he made $4.59 million while Navistar’s total revenue declined 25 percent, and the company laid off thousands of employees.

There is no crisis of resources in the U.S., only a crisis of priorities. The money is there—and it is being spent on tax giveaways to the rich and on inflicting untold misery on Iraqi people. As a banner in an Albany, New York rally against proposed state budget cuts put it: "Public Education—An American Dream. A Dream That No One Wants to Pay For." New York Times op-ed columnist Bob Herbert accurately concluded in early March, "It’s an insane society that can contemplate devastating and then rebuilding Iraq, but can’t bring itself to provide schooling for all of its young people here at home."

Bill Roberts is on the editorial board of the International Socialist Review.


Sources for further reading:

Center on Budget and Policy Priorities: www.cbpp.org

War Tax Fact Sheet: www.coloradicals.org

Council for a Livable World: www.clw.org

Public Agenda: Public Opinion and Policy Analysis: www.publicagenda.org

Military spending: www.goodmoney.org

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