The Deep State (26 page)

This profile in senatorial courage was very touching, and must have been deeply satisfying to billionaire political contributor Sheldon Adelson, who funds newspapers in Israel for the express purpose of supporting the Likud Party, and who has “auditioned” prospective GOP presidential candidates for their conformity with his views. As columnist Jim Newell wrote with minimal exaggeration, “It doesn't matter which Congress it is, or how dysfunctional things get. If there was another Civil War and a batch of states seceded from the union but Israel still needed its war money, the two sides would call a cease-fire, the seceding states would temporarily rejoin the union, go to Congress to pass the funding, and then re-secede and continue fighting.”
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Prisons and Stadiums: The Infrastructure of Choice

Since about 1980, America's domestic infrastructure has become less and less the envy of the world and more often a cautionary tale about the perils of social disinvestment. In the past, examples of the American-built environment were wonders in their own right: Hoover Dam, the Golden Gate Bridge, the Saint Lawrence Seaway, the interstate highway system. That era has ended. One of the few examples of large-scale infrastructure investments today is prisons.

The ten states leading the nation in incarceration—Texas, Florida, California, New York, Michigan, Georgia, Illinois, Ohio, Colorado, and Missouri—operated more than three times as many prisons in 2000 as in 1979, with the total number of facilities increasing from 195 to 604.
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In many poor rural counties in America, prisons are one of the few sources of stable full-time employment. Already by the mid-1980s, booming prison construction was outrunning state resources to operate them; the states turned to private contractors to manage the facilities in public-private partnerships. Private prisons had previously been done away with around the year 1900 because of widespread abuse, but neoliberals saw an opportunity for Lady Justice and Adam Smith to serve the same ends. As of 2011, there were 107 privately operated prisons in America.
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Another example of accelerated public infrastructure investment is sports stadiums and arenas. Dodger Stadium in Los Angeles is one of the last major professional sports facilities that was privately financed—and it was finished back in 1962. Ever since then, municipalities with failing school systems, rutted streets, and ramshackle public transit have lavished hundreds of millions of dollars each on professional sports stadiums. The financial benefits accrue almost exclusively to the wealthy franchise owners while the employment created consists mostly of seasonal, low-wage jobs. Cities typically use skewed economic analyses claiming that the proposed stadiums will have an economic multiplier effect, but, as economist Mark S. Rosentraub writes in his book
Major League Losers,
stadium receipts usually represent little or no net addition to a metropolitan area's economic activity, merely redirecting the local population's entertainment dollars from existing activities to a new one. Furthermore, the cities obtain inadequate shares of stadium revenue, since they usually submit to the extortionate terms of the franchise owners who threaten to leave town if those terms are not met.

All these practices culminated in the 2000s in the $1.5 billion boondoggle of New Yankee Stadium, a project replete with gimmicky tax breaks and suspect land transactions. And now bankrupt Detroit, a crumbling monument to the decay of once-thriving industrial America, will kick in $283 million of public money to build the Detroit Redwings a new arena. This fulsome contribution came as the city moved forward to cut municipal retiree pensions.
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I suspect there are millions of American sports fans who would claim they'd die on the barricades against alien socialism, yet they seem to accept America's preferred form of socialism: the transfer of billions of dollars from municipal taxes into the hands of wealthy developers and franchise owners.

One such die-hard antisocialist sports fan is Wisconsin governor and Republican presidential hopeful Scott Walker. In 2015, the same year his budget slashed $250 million from the University of Wisconsin, one of the nation's premier state universities, Walker handed the identical amount of public money to two hedge fund managers who own the Milwaukee
Bucks basketball team in order to build them a new arena. Walker rationalized the scandalous deal by saying that keeping the team in Milwaukee would garner $6.5 million in state tax revenues per year. That means it will require almost forty years for the state to recoup Wisconsin taxpayers' initial outlay, and we can be sure the Bucks' owners will be clamoring for another new public-financed arena decades before the state's expenditure on the 2015 deal is amortized. Walker's math skills would seem as deficient as his sense of responsibility to the public interest—but the evidence that Jon Hammes, a major investor in the sports franchise, is also a heavy political contributor to the governor, and that only a month before the arena deal he was appointed co-chairman of Walker's presidential fund-raising committee, suggests there is more to it than just poor political judgment on Walker's part.

Why We Fight

American elites do not like to address the contradictions between the extravagance of overseas adventurism and penury at home except in the form of ritual denunciations of bogeymen. The
Washington Post
editorial page, which has increasingly become the Beltway's cheerleader for reflexive interventionism, from time to time sees fit to explain ever so patiently to the public why they must be obliged to intervene abroad, fight, die, and spend. A typical argument goes like this: first, the sorrowful and condescending acknowledgment by the adult in the room that the children are indeed tired of the strain of intervention, war, and being forced to eat their spinach: “As the toll, physical and financial, of the most recent U.S. military engagements undeniably reminds us, that role imposes a price on this country and its people. . . . It is natural that many Americans would wish to lay down that burden. . . . It is equally natural that politicians would compete for votes by promising to give a world-weary electorate what it says it wants.”
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Of course the public only
says
it wants less involvement in war and intervention, but if they were as well informed as the
Post
's editorial
board, they would grasp that the benefits are far greater than the burdens, such as having the dollar remain the world reserve currency and the enjoyment of free trade. The
Post
's editors see the bright side: the bloody struggle of the Korean War and sixty years of U.S. military presence in that country gave us the Samsung smartphone! The editorial then takes a swipe at Senator Rand Paul for entertaining isolationist heresies, chides President Obama for failing to show leadership, and ends with the ritual invocation of General Maxwell D. Taylor's phrase about how the people will not “rally to the sound of an uncertain trumpet,” a cliché these editorials use almost as frequently as their vow of no more Munichs.

Is it true that maintaining the dollar as the world reserve currency depends on having military forces in dozens of countries, fighting wars in Iraq and Afghanistan, and keeping large garrisons in Korea or Germany for decades on end? Since the 1960s there have been concerns about the U.S. dollar losing its leading status, but those concerns originally arose from heavy deficit spending, of which military spending was a significant portion; the growing trade deficit; and the direct foreign drain of dollars as a result of wars and the large expenditures abroad by our garrison forces.

It is a shaky system as well as a Faustian bargain that has many domestic policy downsides, not the least of which has been a hollowing manufacturing base and declining hourly wages. Economist Jared Bernstein believes the advantages of maintaining the dollar as the world reserve currency under the present circumstances are not worth the economic and social costs at home.
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In any case, the dollar's future status will be determined far more by our domestic fiscal and monetary policies and the general health of the economy than by whether the United States sends troops to Ukraine, South Sudan, or the Persian Gulf. The failure of alternative currencies such as the euro to replace the dollar as the world currency has much more to do with their own persistent structural problems than our global military activities and Europe's lack of them.

The
Post
was equally unpersuasive with its free-trade argument. So-called free-trade (actually managed-trade) agreements like NAFTA, the
World Trade Organization, and granting most-favored-nation status to China are at bottom a recipe for the international arbitrage of labor to the lowest possible price. The whole editorial argument suggests slipshod reasoning at best. It does not point to any direct benefit resulting from America's extraordinary martial exertions in the Middle East and South Asia, but instead concocts secondary benefits (such as securing free-trade agreements) that turn out on examination to be tenuous if not nonexistent.

Driving to the Poorhouse in a Gold-Plated Tank

Another perennial backhanded justification for the Deep State and its foreign interventions is the claim that the military-industrial complex generates jobs. It is certainly a rationale Congress embraces on a bipartisan basis. But in reality the wildly uneven concentration of defense contracts and military bases means that some areas, like Washington, D.C., and San Diego, benefit greatly from DOD spending, but in most of the country the balance is a net negative: more is paid out in taxes to the Pentagon than comes back in local contracts. Economic justifications for Pentagon spending are even less persuasive when one considers that the $600 billion spent every year on the DOD generates comparatively few jobs per dollar spent. The World War II days of Rosie the Riveter are long gone; most weapons projects now require little touch labor. Instead, a disproportionate share of the contract price is siphoned off into high-cost research and development.

It was once the case that national defense research spun off many high-payoff technologies, such as commercial airliners with intercontinental range, or jet propulsion, to the civilian economy, but as defense R & D becomes more specialized and exotic, this is now less often true. One could make the case for drones, but given the highly problematic civil liberties issues entangled in the use of this technology, this gift may be a two-edged sword. The rest of the cost of defense contracts goes to exorbitant management expenditures, whopping overhead, and out-and-out padding—including, of course, a small but crucial percentage of the
money that flows back into the coffers of political campaigns. A dollar appropriated for highway construction, health care, or education will create many more jobs than a dollar appropriated for Pentagon weapons procurement. The jobs argument is specious.
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The same cost-benefit ratio applies to Wall Street in its effects on the economy, albeit in an even more concentrated fashion. As the financial services industry has grown from 4.9 percent of America's gross domestic product in 1980 to 8.3 percent at its 2006 peak just before the crash, wealth has become more unequal. The public at large has faced stagnating or falling wages over the last three decades, and has only been able to maintain its standard of living by taking on more household debt. But the public's debts are the financial sector's assets. In New York, the headquarters of the financial services industry, we see the imbalance at its starkest. Despite the staggering wealth in the city that allows for new penthouse suites around Central Park to sell for close to $100 million and one New York restaurant to offer $95,000 truffles on its menu, New York's poverty rate rose to 21.2 percent in 2012.
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The contradiction between the power and majesty of the Deep State and the decline of public services and infrastructure is not an abstraction, as a tour of the rotting, decaying, bankrupt cities of the Midwest will attest. It is not even confined to those parts of the country like Detroit or Cleveland that have been left behind by a Washington consensus that favors the financialization and deindustrialization of the economy in the interests of shareholder value. This paradox is evident even within the Beltway itself, the richest metropolitan area in the nation. Although demographers and urban researchers invariably count Washington as a “world city,” that is not always evident to those who live there. Virtually every time there is a severe summer thunderstorm, tens or even hundreds
of thousands of residents lose power, often for many days. There are occasional water restrictions over wide areas because water mains, poorly constructed and inadequately maintained, burst. The Washington metropolitan area considers it a Herculean task just to build a rail link to its international airport—with luck it may be completed by 2019, fifty-seven years after the airport opened.

Contrast that with the $103 billion the United States government has spent to date in direct aid to Afghanistan along with more than a half-trillion dollars on the U.S. military mission in that country, much of which flows to the local economy. By 2010, U.S. direct and indirect spending accounted for three-quarters of Afghanistan's gross domestic product, and produced economic growth rates of up to 14 percent per year.
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It is as if Hadrian's Wall was still fully manned and the fortifications along the border with Germania were never stronger, even as the city of Rome disintegrated from within and the life-sustaining aqueducts leading down from the hills began to crumble. The governing classes of the Deep State may deceive themselves with their dreams of omnipotence, but others beg to differ. A 2013 Pew poll that interviewed 38,000 people around the world found that in twenty-three of thirty-nine countries surveyed, a plurality of respondents said they believed China already had or would in the future replace the United States as the world's top economic power.
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