Sorry, I'm late.
I had to stop by the Wax Museum again and give the finger to FDR.
We know Al-Qaeda, Zawahiri is supporting the opposition in Syria.
Are we supporting Al-Qaeda in Syria?
It's a proud day for America.
And by God, we've kicked Vietnam syndrome once and for all.
Thank you very, very much.
I say it, I say it again, you've been had.
You've been took.
You've been hoodwinked.
These witnesses are trying to simply deny things that just about everybody else accepts as fact.
He came, he saw, he died.
We ain't killing they army, but we killing them.
We be on CNN like Say Our Name been saying.
Say it three times.
The meeting of the largest armies in the history of the world.
Then there's going to be an invasion.
Okay, you guys, on the line, I've got Ryan McMack, and he is the editor over at Mises.org.
That is the website of the Ludwig von Mises Institute, where they specialize in Austrian school economics.
That is economics.
Everybody else is full of it.
Hey, welcome back to the show.
How you doing?
Hi, it's great to be on.
Very happy to have you here.
Listen, you wrote this important thing, so that's why I wanted to talk with you about it.
The trillion-dollar military still isn't enough for the war party.
How do you get to a trillion, first of all, here, Ryan?
Well, of course, it's standard for people to just quote the number that goes to the Pentagon.
In recent years, it's been, say, about 600, 700, sometimes gets up to around 800 billion.
But that's really not the whole picture.
Robert Higgs has made this point, and I think others are starting to catch on now.
If you're going to talk about military spending, you've got to include everything in there.
You've at least got to include the money that goes to the Department of Energy, specifically for nuclear weapons.
That's a sizable amount.
Interestingly, the White House does include that when they break out the data by subject matter, by function and subfunction.
They actually do include the nukes under national defense.
So you've got to go beyond just the Pentagon budget.
You've got to include that.
And then it's always very important to include spending on veterans.
Some people claim, oh, well, that's completely different.
That comes way later.
That's divorced from the Pentagon budget.
But that's complete nonsense.
The veterans budget is key to recruiting goals and being able to get people to actually volunteer to join the military.
What's being paid out for veterans now is just payments on what was promised by recruiters earlier.
So it's nothing more than basically payroll after the fact for defense.
And so this idea that there's something fundamentally different about veterans spending from defense spending just simply isn't true at all.
If you removed all that veterans spending, all those veterans benefits, you'd have to pay way more in current cash value to get people to join the military now.
So it's just the same thing.
It's just payment delayed.
So that's got to be included.
And then you've got to include homeland security issues.
I mean, it's kind of silly that we even created the Department of Homeland Security.
This notion that the Defense Department isn't geared to protect the homeland.
So I don't know what it is they're doing then if it's not about homeland security.
So we'll create this other thing.
And the key issue of that are these national security agencies that are funded under the Department of Homeland Security, which includes the FBI, for example.
Which, by the way, doesn't even call itself a law enforcement agency anymore.
It calls itself a national defense agency.
So it would be nonsense to leave all of that out.
So once you include all that together, what you're looking at is about a $950 billion budget now for national defense.
And so by the time we get to 2020, based on the White House's own estimates, we're looking at a trillion dollars.
Yeah, man.
You know, I'm glad you mentioned Robert Higgs because you're right.
He is at the forefront of this.
And over the years, and I forget now the Institute for the Center of this and that kind of thing, but there have been liberals and just centrist wonky technocrat types, you know, full on ideology-less bean counters have come up with approximately a trillion dollars as well.
Based on that same standard where you got to make sure to throw in the H-bombs and the VA and DHS and all these other things.
Guantanamo Bay and whatever.
These torture sites, they add up to pretty expensive.
And so, yeah, now that's a lot of money, but so help me out because, you know, again, well, I don't know.
Again, it does.
It just goes without saying that this is the way it has to be.
And otherwise it wouldn't be this way.
I can't help it.
I keep thinking about this.
The first person I ever really heard criticize military spending was my friend's older sister when I was in junior high.
And she was quite literally a hippie in a sundress with a flower in her hair saying, oh, Ronald Reagan is wasting all this money on the B-1 bomber.
And I remember thinking, who cares?
Like, that's the silliest thing.
Of course, there's buying bombers.
That's just, you know, that's life.
That's like the sun rising.
And only a hippie girl in a sundress would complain and think that that's abnormal when everyone else in society seems to agree that this is the way it has to be.
So what's a trillion dollars to a $20 trillion economy anyway?
Well, and the military, of course, benefits from the fact that they can come up with no way to actually assess what the quote unquote correct amount of national defense spending is.
All we know is it should be a lot because otherwise all these other countries are going to invade North America.
And the next thing you know, we'll be speaking Chinese, et cetera, et cetera.
Now, this is something we've covered, of course, at the site considerably since the defense budget is basically based on socialist central planning.
And I mean that not as like a insult, but just a description of how it works in that the defense economy, it has no connection to real market demand or market production.
It's just based on numbers plucked out of the air and then assigned to contractors or to government agencies themselves in terms of you will produce this amount.
And we will base our analysis and our ideas of efficiency just based on, oh, how many things did you build and how many places did you go?
It has nothing to do with actual value delivered because they have no way of measuring that.
And so they just say, well, we don't know what the correct number, but it's bigger.
It's bigger than what we've got now because if you don't do it, we'll all be conquered by the Russians.
And so, I mean, it's just it's very similar in a certain sense to the global warming debate.
And my editorial position at the Mises Institute is, you know, I'm not going to cover the science of global warming, but I do know that you've got to measure the cost of policy designed to address that against the benefits actually gained.
And so if your only defense is do X or the world will end or do X or we'll all be destroyed, I don't find that to be a very convincing argument.
You've got to actually tell me here with the benefits you can expect.
And you've got to make the case for me that it's higher than all of these trillions of dollars you want to extract from the economy.
So a cost benefit analysis would be nice.
But the military never actually does that.
They just say, give us more money.
And you can see this all the time in right wing economists and so on, like at the Heritage Foundation.
And in my articles, I've noted this.
No matter how big the increase in military spending is, you get guys at like the American Enterprise Institute or in this most recent article, I quote a guy who I actually carry articles sometimes by him on economics topics.
But his position is, well, the cost of spending too little on defense is certainly higher than the cost of not spending enough.
So, OK, that's his whole rationale, I guess.
So we should be spending two trillion dollars than on defense, because if you don't, well, then something bad might happen.
And so it's just amazing what passes for cleverness or for a rationale when you're talking about defense spending.
Now, of course, the reality is, as we note, the U.S. is spending more than the next seven countries combined on defense.
And most of those are allies.
We're talking about France, the U.K., Japan, Germany.
And then, of course, everyone just ignores the fact that the United States has a gigantic nuclear arsenal, thousands of warheads, intercontinental ballistic missiles.
And this is thousands more than China has.
And just basic IR theory, I mean, this isn't even like controversial.
It's just to point out that if you have a huge nuclear arsenal, that's a pretty major deterrent.
And Eisenhower subscribed to that view.
That's why he actually cut defense spending at the same time that the Soviet Union was developing its own nuclear arsenal.
He said, well, we can't afford to keep this gigantic army all the time.
We've got to cut spending there.
But we've got a nuclear arsenal, and that'll be enough for defense.
And, of course, he's correct.
The deterrent effects of having this are huge.
Other countries are not going to attempt anything that creates an existential threat against a state that has the actual ability to retaliate in a nuclear fashion.
This is why the U.S. doesn't invade North Korea.
This is why countries like Pakistan want nukes because they know it's the only sort of deterrent that actually works against a country with a huge conventional military like the U.S.
It works for the U.S. just like it works for other countries.
Yeah, we could do it with a lot fewer weapons than we have, too.
It only takes one handful to deter all the major powers on Earth.
You want to keep your capital city?
You stay out of North America.
Pretty easy.
Oh, you know what?
I forgot to ask you earlier, though.
Sorry to backtrack, but do you include the interest on the debt?
Is there a way to apportion how much of that is directly attributable back to defense spending in the past?
I have done that in past articles.
I didn't do that in this one, but it can be done in the sense where you've got to guess a little bit.
But you could just go back and kind of take an average of how much of the debt or how much of the annual spending is attributed to defense, and then you could apply that to the debt.
So we could say take 25 percent of the debt service in any given year, and that would probably be fairly accurate in terms of how much.
And how much would that be?
Let's see.
The debt service in recent years, I think with the interest rates being low, I think has been about $300 billion.
So let's say $80 billion in addition should be added to that.
The numbers aren't actually very high right now in the big scheme of things because of interest rates being so low.
But then you've got to factor in others, which are very hard to calculate.
That asset price inflation that makes housing less affordable is a result of monetary policy designed to keep interest rates low.
And so, therefore, you need to attribute some of that to the national defense budget also.
But that's really hard to do.
But you should really, when it's really hard for you, you're a first-time homebuyer and you can't afford that house because there's been so much inflation there, or you're a pensioner and your fixed income is going down because the low interest rates have made it difficult for your pension fund to actually get some yield.
You should blame some of that on the Pentagon also.
But that's real hard to come up with a solid number on.
Well, that's the whole thing, right, is a lot of these things are just, you know, how much do you miss your Uncle Bob who blew his brains out because he lost everything in the crash?
You can't really quantify that.
And so that kind of thing doesn't get accounted for as much.
But, you know, I was just reading a thing this morning where suicides are continuing to climb.
The rate continues to climb.
And it goes, I think, along with an article that you had written back in the archives here.
This is a slight diversion from our topic, but not really.
It's on it.
It's not capitalism and keeping up with the Joneses and stuff that's making people miserable.
It's, you know, all of these factors, a lot of which have to do with the unpredictability in the economy that's caused by this boom and bust cycle.
And then there's this Wall Street Journal article from August the 30th.
Historic asset boom passes by half of families.
This is just what you're talking about.
If you already own a nice big house, then, hey, it's getting more and more expensive all the time.
But essentially, you're just on welfare, collecting the benefit from the government, printing all of this paper money at the expense of everybody who didn't get in on the bubble at the low end and is then left out.
And they talk about it in this article, and they have all of these charts and everything to show how the people in essentially the bottom half of the economy, many of whom lost everything or much of everything they had in the last crash, they have not even begun to get back to where they were before that crash.
And here we are on the verge of the next one.
And so it's no wonder that people are blowing their brains out, essentially, because instead of having slow and steady growth in the economy and a reliable economy based on a sound currency, instead, we have this wild inflationary policy with these artificially low interest rates that cause these just terrible – you can't overstate how terrible the booms and the busts are that are generated by this crisis.
They're generated by this government and tying it back here to make the wars seem free, to make the empire seem free.
So you can keep your tax rate nice and relatively low, I guess, not raise it high enough to cause a revolt.
How about that?
But they can still pick the corners off of your dollars and fleece you anyway.
And then so people are paying with the results and their homelessness and their broken businesses, their broken families, their broken lives, their drug addictions and all the problems, all the social problems that come with this stuff.
Trillion dollars a year, call it five, call it 10.
How much is a human life worth when he kills his whole family and then himself, like happens every single day around here?
Well, and those sorts of incalculable costs are important in the international sphere too, because it seems that additional spending, having a huge military, having a posture of making constant threats toward other regimes and so on, has a cost that's never calculated there either.
And in fact, lays the groundwork for justifying and needing more defense spending.
And that's a point that Stephen Wertheim makes in a column that I quote that he did for the New Republic.
Now, a lot of, unfortunately, a lot of columns, just a bunch of like standard left wing stuff.
And, oh, he's got to get in his stuff about how he thinks Trump is a bad guy and all the fine, whatever.
But I mean, the central point of it was actually underdeveloped.
I wish he had done more with it.
That look, when you've got this huge military and you're running around the world, bombing countries, creating paranoia in other states, paranoia that I guess is not really paranoia.
It's based on actual experience that the U.S. might target you next.
Then it essentially creates the conditions for another arms race and creates the conditions where other states are constantly attempting to find alliances with the country, other countries that don't like the U.S. and attempt to protect themselves.
So then the Pentagon comes back and says, oh, look, these countries, they're building up their military.
We need to, you need to spend more on us now.
And so by creating a large military basically creates the conditions in itself for the need for a larger one.
And this is something that's never talked about.
What's the article you're referring to specifically, the author again?
Stephen Wertheim is the name.
And it was a New Republic article he did.
Oh, it's the one you linked to here.
Yeah.
And I mean, this is something that is completely ignored.
Yeah.
You know, I was going to make that point.
I'm trying to think ahead, six months ahead for my big debate with Bill Kristol in New York next May.
And that was one of the points I was going to make about, you know, when it comes to all the, oh, we have to contain the rise of China.
The two big turning points in Chinese military affairs were America's Iraq War I and then Bill Clinton's sale into the Seventh Fleet, I think it was, through the Taiwan Straits in 1997.
And in both of those cases, the Chinese military establishment, the PLA, then went to the Communist Party and said, listen, we need more money and we need new doctrines and we need to build up our defenses.
And again, this self-licking ice cream cone, America going around looking for monsters to destroy and seeing them where they exist and where they don't.
It's pretty obvious how everyone else has to react to that.
Well, and this is the point I actually quote Wertheim specifically on this article showing how history doesn't even bear out that this is a good strategy.
Noting that Paul Wolfowitz and his friends, they went to the Pentagon 20 years ago almost now and said, OK, give us a boatload of money and we will assert global dominance and we will prevent the rise of China and of anybody else.
Well, 20 years later, guess what?
It didn't work.
And but, you know, we're still being told, oh, if you just give us more money, we'll basically control the entire globe.
And of course, it's going to fail.
And that what people don't admit in the Pentagon, of course, is that the strategy can fail without any actual threat to the United States.
I mean, China has no ability, even if the U.S. massively sliced defense spending.
China cannot assert itself as a hegemon in the Western Hemisphere.
It's just it's it's not going to happen.
It's not going to take over the Americas.
The U.S. has rock solid dominance throughout the Americas, throughout the Pacific, at least throughout its side of the Pacific.
And so there is no threat to the U.S.
Considering the fact as long as the U.S. has this Navy and this this these these nukes, it's this idea that the Chinese are going to be invading North America is it's an absurd notion.
But I mean, that is what is kind of implanted in the minds of America every time these these right wingers from, say, Heritage and other such places say, well, you know, the the Navy is at the point of collapse because you haven't given it a 20 percent funding increase.
It's got to rebuild everything.
And well, OK, but none of that has actually anything to do with protecting the U.S. from invasion.
Right.
Well, and then so you take it the other way around to just look at the map, even one like mine where North America is in the center and Eurasia is cut in half and has to be on the outer edges.
You just look.
It seems crazy, doesn't it?
Everyone to think that the middle part of North America must be the dominant military force in all of Eurasia from now on indefinitely into the future history of humanity.
Security will be run from D.C..
Thank you very much.
And no one else gets to say, does that make sense?
Well, and it doesn't.
And of course, that's not going to be the reality in 100 years.
I mean, there's just nothing that can be done about it.
When you look at the Eurasian landmass and you look at what the Russians and the Chinese can do in terms of defense, the U.S. does not have the ability to invade Asia and take over China and Russia in those terms.
Or overthrow them in any effective way either.
That's the real danger, right, is like when Carl Gershman wrote in The Washington Post, the head of the National Endowment for Democracy, back in 2013, when they were starting the Maidan coup in Kiev, he was saying, hey, if Putin doesn't like it, he might find himself on the receiving end of one of these revolutions next.
And that's the kind of thing that I think is much more likely to lead to a war than a successful coup.
Oh, well, yeah.
I mean, clearly the CIA has got its own stuff going on, and there will be attempts to sow all kinds of discord in all these places.
Of course, that's not how nationalism works, necessarily.
Just going in and meddling in the affairs of a foreign country doesn't necessarily make the people in that country more likely to accept your meddling, as has been shown many times over.
And so it's just not a matter of throwing more money at the Pentagon and thinking everything will work out.
In reality, they're actually laying the groundwork for more resistance, for more arms races, for more costly problems.
And then at the core of it all is the problem that all of this defense spending crowds out private investment, crowds out development in the private sector, crowds out technological expertise that could go to the private sector to develop the American economy.
And really, American military ability has always rested on its industrial – and by industrial, I don't mean manufacturing.
I just mean its economic prowess.
It's the fact that it's just a huge economy based on the fact that it's a relatively free economy compared to these other countries.
Well, what do you make of the arguments that, well, thank goodness for the state of permanent war because that's what's caused all this government subsidy for the high-tech industry in America?
Otherwise, we'd be stuck in the 1980s with old cassette decks right now.
Right.
This is just the worst.
I mean this has been debunked, of course, at Mises.org time and time again, this idea that, oh, well, thank goodness we had the space program because now we can drink Tang.
And just this idea that there would be no technological innovation without government spending has just been shown to be false over and over again.
OK, but wait a minute.
What about all the times, though, that people at universities are the ones who really come up with the cool stuff rather than the R&D departments at these companies?
Well, how do you define cool stuff?
I mean, yeah, you can come up with something that looks cool in a headline or gets demonstrated on the news sometime.
But what actually makes human lives better are the sorts of things that actually make it reduce your labor at home, increase your standard of living.
And spiffy nukes do not increase your standard of living.
All of this stuff that supposedly counts as innovation because they're making new military satellites and stuff doesn't actually improve your daily lives.
Now, what they say is, oh, well, they then take these innovations and then apply them to civilian applications.
OK, but why do you need the military application between the investment and the civilian application?
You don't.
There's no actual reason to believe this.
You could simply, instead of hiring all of those engineers that come out of higher ed and telling them to go work for the Pentagon or for a weapons manufacturer, actually allowing the private sector to develop and to hire those people instead and to develop goods and services for the market that people actually are willing to pay for.
And that's the thing, too, is in the private market, people show their demonstrated preferences.
They want XYZ.
When you develop things for the military, there's no way to know if people actually wanted that because what funded that was tax dollars extracted by force from the taxpayers.
Oh, well, shovel it over to Raytheon or whatever.
Would people have given that money to Raytheon in the marketplace freely?
We don't know.
It's a safe bet that in many cases they would not.
Right.
Well, so speaking of which, though, so what about the economics of this iron triangle and their lock on American policy?
I mean, it costs chump change to fund 50 think tanks to churn out studies all year long about why this has to continue.
It's point zero zero zero one percent of the government checks that they cash to turn in these weapons.
And so and I mean, look at Afghanistan right now where the president is the one who wants out most in the government and the rest of the government and the rest of the entire establishment and all of the media are aligned in a ring to stop him.
We cannot give up that base.
Are you kidding me?
We have a base.
Well, the fact is that most Americans, I would suspect, don't even really know that that's still even going on or have any idea of what the actual cost is.
But the people who do know have a vested interest in it and they'll never give up and they have an endless amount of money because they reach right into the treasury to pay for what it takes to continue to reach right back into the treasury.
Certainly.
And there's no real cost of running bigger deficits so long as interest rates remain low and so long as you can use monetary policy to basically launder more money for federal spending.
Now, if you actually had to institute a new tax or a tax increase every time they wanted to invade a new country or so on, I think you'd probably find a very different reaction from the public.
But they've managed to divorce government spending from the tax bill that people see.
So it's more of a hidden tax in terms of asset price inflation developed from monetary policy and so on.
So a lot of it is done in the dark and in the shadows and that is because they suspect that the public isn't really as enthusiastic about it as they claim it is.
And certainly, sure, you get lots of people, you get lots of Republican politicians and of course Democrat politicians too who are useless on this issue except maybe Tulsi Gabbard who are talking about, you know, of course you can't cut defense spending.
I mean, it's just the most important thing in the universe and we need a trillion dollars to do it even though the next country is spending like a tiny fraction of that.
And the fact that the U.S. is clearly the hegemon throughout North America and is at no risk of invasion.
OK, well, we need that trillion dollars.
And the average American looks around and they say, well, my taxes aren't going to go up if they spend more.
So whatever, I got other things to do.
And so they just they just stop noticing and it hasn't really impacted.
And of course, it's not like they have sons in the military who are being killed or being drafted and things like that.
At the same time, though, everybody knows there's whispers everywhere that the crash is coming.
But why should there be a crash?
And why shouldn't the economy just sort of kind of hum along?
Occasionally, you can have the frost wipe out the orange crop or you're going to have a brand new discovery of silver in Siberia that drops the price down or things are going to happen in the economy, you know, that are disruptive.
For some reason, we have this massive bust every 10 years or so.
And everybody knows one's coming right now.
Again, they don't make the connection to the foreign policy.
As you say, they're looking at the tax bill saying, I guess it's all right.
But the idea is that war is good for the economy.
How come everybody's doing so bad then?
Other than the very richest people who get to benefit directly from the inflation.
People amazingly still believe that.
I actually encounter people in the wild who, yeah, think that war is good for the economy.
Well, I mean, it's good for certain weapons manufacturers and so on.
But there's no evidence that it's good for the economy.
In fact, it's a drain, of course, for the reasons we've just discussed.
I think the plan, the hope of the regime is that there isn't actually a bust that you can point to and say, oh, look, everything changed that day.
We've had a couple articles by a good economist named Brendan Brown at Mises.org.
And his stuff is kind of underrated because it's a more technical nature.
So I think people read it and they don't really understand it.
You've got to be a little more economically inclined to understand his calls.
But he's talked about how really you could keep doing what you're doing and sustain things for even longer, for even another decade or so on.
The result, however, is that your real earnings and your real wealth continue to go down.
So if we look at the numbers.
In other words, you don't see like a September 2008 type crash coming.
That's not necessarily what will happen.
Now, it could happen because, of course, the central bank isn't necessarily amazing at its job.
And its job, of course, as far as it sees it, is to manage these sorts of bubbles.
So it could still fail in those things and you could have a big crash.
But it's not inevitable in a dramatic sense, is Brown's point, in that he's saying you can just slowly let the air out.
And it's not a coincidence, probably, that when you look at household earnings and median incomes and so on, since the late 90s, after the dot-com bust, we've been essentially in an economy of permanent stimulus since then.
And what you've seen are things basically flatten out in terms of real wage gains and that sort of thing.
And he says you can just keep doing that.
You can kind of coast along doing that.
Nobody's getting richer.
People at the lower end of the economy are probably getting poorer.
You're going to have rising inequality.
This is all thanks to the machinations of the central bank and so on.
But it's not necessarily going to play out in a way where everybody's going to say, hey, look, well, the stock market crashed and now there's massive unemployment.
You could just have simply people switch more and more to working part-time, to having a couple of part-time jobs, to having slowly decreasing real wages, even while their nominal wage might be kind of maybe treading water.
But these are the sorts of things people don't really notice, and that's another way to hide the way that people are being impoverished by the federal spending regime.
Central banking and more.
Mises.org, everybody.
That's the great Ryan McMackin, editor over there.
Appreciate it.
Thank you.
All right, y'all.
Thanks.
Find me at libertarianinstitute.org, at scotthorton.org, antiwar.com, and reddit.com slash scotthortonshow.
Oh, yeah, and read my book, Fool's Errand, Timed and the War in Afghanistan at foolserrand.us.
