Monday, April 30, 2012

War, Money, and Moral Hazard

War, Money, and Moral Hazard

By Thomas Magstadt

Moral hazard.  Economists define it as a problem arising from a tendency to take big risks where the potential rewards are great – hence the hazard.  The moral issue comes into play when the risk-taking individual or enterprise does not have to pay the consequences – when taxpayers, for example, are forced to bail out banks after they make colossal "casino" bets that fail.

Where there's no incentive to correct the offending behavior, there's every likelihood that it will happen again.  And here's the kicker:  the "it" isn't necessarily an economic crisis; it can be any crisis or catastrophe, including armed conflict. 

In the wake of the US bank-induced 2008 global financial crisis, policy makers, pundits, and economists suddenly rediscovered moral hazard in the under-regulated "free-market economy" both as a theoretical concept and as an existential danger.  Nobody was more ardent in pushing this idea than then Secretary of the Treasury Henry Paulson, who served in that position from 2006 to 2009.  His highest qualification for that high position was his former role as CEO of Goldman Sachs (1999-2006).  Goldman Sachs, of course, was one of the 20 or so massive commercial banks that were deemed too big to fail, one of the banks that private investors and the general public trusted to manage risks – and paid countless billions of dollars in transaction fees precisely for that purpose.

Moral hazards, however, exist outside the sphere of economics, too.  In fact, they arise in virtually all areas of our private and public life – including love and war where, despite the old bromide, all is definitely not fair.

Consider the case of Army Captain D.J. Skelton from my home state of South Dakota.  Severely wounded in an ambush attack in Fallujah, Iraq, in November 2004, Skelton survived massive injuries that might well have proven fatal. Skelton's story is one of amazing courage, valor, and devotion to duty.  His heroism is a matter of public record thanks to an article that appeared recently in Star and Stripes.*  After five months in the Walter Reed Medical Center and dozens of surgeries, he faced another fight – to stay in the Army – and won, despite having wounds that will never heal. To wit:

…A prosthetic left eye that never blinks…momentous hunk of shrapnel…ripped through his eye traveled with a terrible, beautiful precision, leaving the eyebrow, nose, and cheek more or less intact. An inch above or a trajectory angled just a few degrees higher and the metal would have pierced his brain. He would be dead. 

Scars rise up on his arms, legs, and torso. Shards of shrapnel ringed his heart but somehow missed it. Skelton’s right leg has so much metal holding it together and so few nerves that one of his party tricks is to stab a knife into his shin and walk around painlessly.

His left hand is nearly immobile, balled in a perpetual fist… [He] still has a golf-ball sized hole in his palate. Without a custom prosthetic, he cannot eat, drink, or, often, breathe.

Inspired largely by other patients, he fought to stay in the Army.

The army of today – the one in which Captain Skelton so valiantly serves – is fundamentally different from the army that fought in World Wars I and II, Korea, and Vietnam.  Next year, the United States will "celebrate" the 40th anniversary of the All-Volunteer Army – the professional military force brought into being in 1973 in the wake of the worst, costliest military debacle in US history.  It's clear now that one terrible mistake led to another:  the absence of a draft has created a wall of separation between the soldiers sent into battle and the society of the preternaturally insular country they bravely serve.  There could hardly be a more jarring contrast than between the violent cadence of combat operations in a modern-day war zone public and the peaceful rhythm of life in the leafy suburbs that ring our cities – bullets and bombs versus business-as-usual.

Every day in this country, we see lots of bumper stickers urging us to "Support Our Troops" on our highways and byways.  And flags.  Lots of flags.  We're so patriotic, but how many of us have a son or daughter in Afghanistan? How many of us knew a single soldier who like D.J. Skelton was severely wounded in Iraq?  But members of my generation, children of the Vietnam era, either served in Vietnam or certainly knew guys (women were not allowed to serve in combat roles at that time) who not only served but also paid the supreme price.  We all had friends who were killed in Vietnam; many of us had neighbors who came back alive but lost eyes, arms, legs.  One of my neighbors in Sioux Falls, for instance, had his legs blown off and nearly lost one arm when he stepped on a land mine only weeks into his deployment.  He was 18 years old at the time.

Because there was a draft, we were all deeply affected by that war and because it was not a war that made any sense – the very antithesis of World War II, for example – we opposed it as a nation of free and enfranchised citizens.  And we eventually won the war in the streets.  We did support our troops – not by forgetting about them and going on with our lives as we do now, but by forcing the politicians to bring them home from a losing war we could well afford not to win.  

So why did my generation behave so differently from the current one?  The short answer is the obvious one: there's no draft.

But the disconnect – the moral hazard – is compounded by another wall of separation between the generals and the warriors.  The generals in the Pentagon view the battlefield from a safe distance; they decide grand strategy and debate the merits of tactical adjustments and creative ideas for applying new weapons systems and technologies in ever-more destructive ways.  That's war – for the generals.  For the infantry combat is not about theoretical in the least, not about simulations or war games.  Not a game in any sense of the word. 

For the soldier on patrol in exquisitely dangerous places like Fallujah or Kandahar, war is existential in the purest sense.  To exist or not to exist.  That is the question grunts in such places have to ask with every step they take. But the generals, colonels, lieutenant colonels, and even majors, seldom see fit to put themselves in harm's way. It wasn't always so.  And, along with wide differentials in pay and benefits, it constitutes another moral hazard, one active-duty senior military officers rarely if ever acknowledge, much less address in any serious way.

Then, too, there is a total disconnect between the enlisted men, NCOs, and junior officers who do the fighting and the swaggering politicians who debate and posture and talk tough from a safe distance.  Precious few members of the US Congress have a son or daughter in the armed forces.  In the Iraq war, for example, it was only slightly above 1 percent.  In 2011, CNN's Jennifer Rizzo reported:**

Members of Congress are quick to say they support the troops and veterans, but the number of elected officials who have served has plummeted to its lowest point since World War II.

Only 20% of the 535 members of the new Congress have served in the military, 25 from the Senate and 90 from the House of Representatives.

Juxtapose that with 1975, when over 70% of those elected had served in the armed forces.

The latest trends in warfare are giving rise to yet another disconnect – between combatants and casualties of war. Drones operating in conjunction with GPS satellites are the new weapons of choice.  The new high-tech warriors pulling the trigger do not see the people they kill before or after they do it.  They do not have to be present in the country where the killing takes place.  In fact, one can now imagine warriors of future fighting battles without ever setting foot in the region where the war is being waged.

And, finally, back to economics.  We have brought into being the military-industrial complex President Dwight Eisenhower warned against in his farewell address a half century ago.  It's worth remembering that the man Americans called, as "Ike" was not only the Commander in Chief but also a five-star general in World War II – a military man who spurned militarism. 

Our war economy is self-perpetuating and mutually enriching for defense contractors, arms manufacturers, and the politicians who collude with the Pentagon to keep the war machine fully stoked.  There is virtually no congressional district in the United States that does not have key defense industries, military installations, and major suppliers of uniforms, food, fuel, and medicines, as well as a wide range of services to the armed forces.  Pull the plug on military spending and every state in the union would feel the economic impact – some more than others, of course, but none would be spared.  Incumbents in Congress would pay a heavy price.   

As it is, the people who pay the price for keeping the war economy going are the taxpayers and the troops – the former with money, the latter with lives and limbs.  Meanwhile, the individuals and enterprises that benefit from war while taking no risks and bearing no costs are incentivized to do it again and again, thus giving rise to the mother of all moral hazards.

This article was published at NationofChange at: All rights are reserved.

Donations can be sent to the Baltimore Nonviolence Center, 325 E. 25th St., Baltimore, MD 21218.  Ph: 410-366-1637; Email: mobuszewski [at] Go to


"The master class has always declared the wars; the subject class has always fought the battles. The master class has had all to gain and nothing to lose, while the subject class has had nothing to gain and everything to lose--especially their lives." Eugene Victor Debs


Sibel Edmonds Finally Wins

Sibel Edmonds Finally Wins

By David Swanson

Sibel Edmonds' new book, "Classified Woman," is like an FBI file on the FBI, only without the incompetence.

The experiences she recounts resemble K.'s trip to the castle, as told by Franz Kafka, only without the pleasantness and humanity. 

I've read a million reviews of nonfiction books about our government that referred to them as "page-turners" and "gripping dramas," but I had never read a book that actually fit that description until now.

The F.B.I., the Justice Department, the White House, the Congress, the courts, the media, and the nonprofit industrial complex put Sibel Edmonds through hell.  This book is her triumph over it all, and part of her contribution toward fixing the problems she uncovered and lived through.

Edmonds took a job as a translator at the FBI shortly after 9-11.  She considered it her duty.  Her goal was to prevent any more terrorist attacks.  That's where her thinking was at the time, although it has now changed dramatically.  It's rarely the people who sign up for a paycheck and healthcare who end up resisting or blowing a whistle. 

Edmonds found at the FBI translation unit almost entirely two types of people. The first group was corrupt sociopaths, foreign spies, cheats and schemers indifferent to or working against U.S. national security.  The second group was fearful bureaucrats unwilling to make waves.  The ordinary competent person with good intentions who risks their job to "say something if you see something" is the rarest commodity.  Hence the elite category that Edmonds found herself almost alone in: whistleblowers.

Reams of documents and audio files from before 9-11 had never been translated.  Many more had never been competently or honestly translated.  One afternoon in October 2001, Edmonds was asked to translate verbatim an audio file from July 2001 that had only been translated in summary form.  She discovered that it contained a discussion of skyscraper construction, and in a section from September 12th a celebration of a successful mission.  There was also discussion of possible future attacks.  Edmonds was eager to inform the agents involved, but her supervisor Mike Feghali immediately put a halt to the project.  

Two other translators, Behrooz Sarshar and Amin (no last name given), told Edmonds this was typical. They told her about an Iranian informant, a former head of SAVAK, the Iranian "intelligence" agency, who had been hired by the FBI in the early 1990s.  He had warned these two interpreters in person in April 2001 of Osama bin Laden planning attacks on U.S. cities with airplanes, and had warned that some of the plotters were already in the United States.  Sarshar and Amin had submitted a report marked VERY URGENT to Special Agent in Charge Thomas Frields, to no apparent effect.  In the end of June they'd again met with the same informant and interpreted for FBI agents meeting with him.  He'd emphatically warned that the attack would come within the next two months and urged them to tell the White House and the CIA.  But the FBI agents, when pressed on this, told their interpreters that Frields was obliged to report everything, so the White House and other agencies no doubt already knew.

One has to wonder what U.S. public opinion would make of an Iranian having tried to prevent 9-11.

Next, a French translator named Mariana informed Edmonds that in late June 2001, French intelligence had contacted the FBI with a warning of the upcoming attacks by airplanes.  The French even provided names of suspects.  The translator had been sent to France, and believed her report had made it to both FBI headquarters and the White House. 

Edmonds translated other materials that involved the selling of U.S. nuclear information to foreigners and spotted a connection to a previous case involving the purchase of such information.  The FBI, under pressure from the State Department, Edmonds writes, prevented her from notifying the FBI field offices involved.  Edmonds has testified in a court deposition, naming as part of a broad criminal conspiracy Representatives Dennis Hastert, Dan Burton, Roy Blunt, Bob Livingston, Stephen Solarz, and Tom Lantos, and the following high-ranking U.S. government officials: Douglas Feith, Paul Wolfowitz, and Marc Grossman.

When Edmonds was hired, she was the only fully qualified Turkish translator, and this remained the case.  In November 2001, a woman named Melek Can Dickerson (referred to as "Jan") was hired.  She did not score well on the English proficiency test, and so was not qualified to sign off on translations, as Edmonds was.  Melek's husband Doug Dickerson worked for the Defense Intelligence Agency under the procurement logistics division at the Pentagon dealing with Turkey and Central Asia, and for the Office of Special Plans overseeing Central Asian policy.  This couple attempted to recruit Edmonds and her husband into the American Turkish Council and the Assembly of Turkish American Associations, offering large financial benefits.  But these were organizations that the FBI was monitoring.  Edmonds reported the Dickersons' proposal to Feghali, who dismissed it. 

Then Edmonds discovered that Jan Dickerson had been forging her (Edmonds') signature on translations, with Feghali's approval.  Then Edmonds' colleagues told her about Jan taking files out of other translators' desks and carrying them out of the building.  Dickerson attempted to control the translation of all material from particular individuals.  Dennis Saccher, who was above Feghali, discovered that Jan was marking every communication from one important person as being not important for translation. Saccher attempted to address the matter but was shut down by Feghali, by another supervisor named Stephanie Bryan, and by the head of "counterintelligence" for the FBI who said that the Pentagon, White House, State Department, and Congress would not allow an investigation.

Had Edmonds understood the truth of that statement, it might have saved her years of frustration and stress, but it would have denied us the bulk of the revelations in her book.  Dickerson threatened Edmonds' life and those of her family.  Edmonds lost her job, her reputation, her friends, and contact with most of her family members.  She watched Congress cave in to the President.  She watched the government protect the Dickersons by allowing them to flee the country.  She listened to Congressman Henry Waxman and others in 2005 and 2006 promise a full investigation if the Democrats won a majority, a promise that was immediately broken when the Democrats took control of Congress in 2007.  Edmonds was smeared in the media, and her story widely ignored when media outlets got parts of it right.  The Justice Department claimed "States Secrets" and maneuvered for a cooperative judge (Reggie Walton) to have cases filed by Edmonds dismissed.  The government classified as secret all materials related to Edmonds' case including what was already public.  The Justice Department issued a gag order to the entire Congress. 

And Congress bent over and shouted "Thank you, sir, may I have another?"

As less confrontational approaches failed, Edmonds became increasingly an activist and an independent media participant and creator.  Her story and others she was familiar with were rejected and avoided by the 9-11 Commission.  She worked with angry 9-11 widows and with other whistleblowers to expose the failures of that commission.  Disgusted with whistleblower support groups that only offered to help her when she was in the news and never when she needed help most desperately, Edmonds started her own group, made up of whistleblowers, called the National Security Whistleblowers Coalition.  She started her own website called Boiling Frogs Post

When an unclassified version of a report on Edmonds' case by the Justice Department's Inspector General was finally released, it vindicated her. 

Edmonds has received awards and recognition.  Her story has been supported (with rhetoric, not action) by Congress members and backed up by journalists.  It appears in this forthcoming film.

Coleen Rowley, another FBI whistleblower, one who was honored as a Time magazine person of the year along with two others, told me: "What I find so remarkable is Sibel's persistence in trying every avenue and possible outlet in trying to get the truth out. When going up the chain of command in the executive branch and Inspector General internal mechanisms for investigating fraud, waste, and abuse went nowhere, she sought judicial remedy by filing lawsuits only to be improperly gagged by 'state secrecy privilege'.  Along the way she also sought congressional assistance, testified to the 9-11 Commission, and engaged with various media and other non-governmental organizations.  It's somewhat ironic that Sibel herself demonstrated such enormous energy and passion throughout this decade quite the opposite of the 'boiling frog' idiom she uses for her website as a warning to others.  If her book can inspire readers to summon even 1/100th of the determination and resolve she has modeled, there's hope for us!"

Yet, thus far, no branch of our government has lifted its little finger to fix the problem of secrecy and the corruption it breeds, which Edmonds argues has grown far worse under President Obama.  That's why this book should be spread far and wide, and read aloud to our misrepresentatives in Congress if necessary.  This book is a masterpiece that reveals both the details and the broader pattern of corruption and unaccountability in Washington, D.C.  Edmonds has not exposed bad apples, but a rotten barrel of toxic waste that will sooner or later infect us all -- not just the whistleblowers like Sibel and the thousands of people in our government who see something and dare not say something for fear that we will not have their back.  

Let's have their back.


David Swanson's books include "War Is A Lie." He blogs at and and works for the online activist organization He hosts Talk Nation Radio

KnowDrones Tour needs help/John Brennan Sunday on ABC on drones-'Sometimes You Have to Take Life to Save Lives'



Let me know if you can help.  The Tour is coming to Baltimore from May 3 through May 8.  We are seeking a site to park the drone replica during the evenings and places for four people to sleep in the evenings.  Let me know if you can help us with these two requests.


And then we need your participation in some or all of the events we have planned, as listed below.  There was an excellent forum at Hopkins on April 27.  The JHU Human Rights Group did a great job in bringing people out for a discussion on drone research at the Applied Physics Laboratory. See below the other events planned, and let me know if you can join us.






     Thursday, May 3 – 4 PM – Vigil outside Rep. Dutch Ruppersberger's office on Padonia Road in Timonium, Maryland.  At 4:45 pm, a letter will be dropped off at Rep. Ruppersberger's office, located at The Atrium, 375 West Padonia Road, Suite 200, Timonium MD 21093.  The letter will challenge the congressperson to condemn the use of drones in warfare, and will call on him to resign from the Unmanned System Caucus and return all campaign contributions received from military contractors, including those to his Dutch PAC.    


     Then we will go to Mount Vernon from 5:30 to 7 PM during First Thursday in Mount Vernon.  Be at Centre and Charles Streets.


     Friday, May 4 - 11:30 AM – 3:30 PM - The tour will visit Goucher College and Towson University.  Help distribute literature outlining Ruppersberger's campaign donations from major drone manufacturers.  We will also visit AAI in Cockeysville.


     5 – 6 PM - The drone tour will join the weekly silent peace vigil outside Homewood Friends Meetinghouse, 3107 North Charles Street, Baltimore, MD 21218.  Afterward there will be a potluck dinner in the meetinghouse, followed by the showing of "1984", Richard Burton's last film.


     Saturday, May 5 – Noon to 2 PM – drone replica(s) will be part of a demonstration in Towson, MD at the intersection of Dulaney Valley Road and Fairmount Avenue.  Later in the day, the drone replica will be in Wyman Park.  It will be an opportunity for dialogue about the use of drones.


    7 PM, Organizing Against Drones Forum with Nick Mottern of and Max Obuszewski of the National Campaign for Nonviolent Resistance. A surprise guest will be a person from Pakistan.


    Tuesday, May 8 – 8 AM, Direct actionistas will gather at Homewood Friends Meetinghouse at 8 AM to prepare for a visit to John Hopkins University Homewood Campus.   At noon, participants will go the campus to deliver a letter to the school’s president, condemning its drone research.

White House Defends Drones Despite Civilian Deaths

'Sometimes You Have to Take Life to Save Lives'

by Jason Ditz, April 29, 2012

It’s no real secret that the Obama Administration’s ever escalating drone war has killed a massive lot of innocent people, but White House counterterrorism advisor John Brennan was surprisingly glib today when pressed on the matter in an interview with ABC’s “This Week.

Unfortunately, in war, there are casualties, including among the civilian population,” Brennan insisted, though he did not mention that the drone strikes have been carried out almost exclusively in nations with which the United States is not at war: Pakistan, Yemen and Somalia.

Brennan went on to defend the killings, saying “sometimes you have to take life to save lives.” He provided no examples of how the killing of nearly 2,000 people, virtually all of them unidentified, had “saved lives.”

Indeed the only thing that the drone strikes have conclusively done is ruin the US relationship with Pakistan, whose parliament has conditioned a return to normal relations on the US ending such attacks.

Ann Wright
Twitter: annwright46
"Dissent: Voices of Conscience"


Sunday, April 29, 2012

Lockheed Throws Its Weight Around (Again)

Lockheed Throws Its Weight Around (Again)

In Montgomery County, Maryland — just outside of Washington, DC — the county executive recently proposed, as a part of his annual budget, a no-strings-attached grant of $900,000 to Lockheed Martin, the largest military contractor in the world. Citizens of the county objected to the handout in public hearings that the county council held on the budget.

One member of the council, after hearing citizen testimony, commented that the county could probably find better ways of spending $900,000. This was the only public comment any member of the council made on the issue.

Yet The Washington Post immediately criticized the county council in a vitriolic editorial in which it accused the council of engaging in “demagoguery masquerading as social justice.”

Lockheed Bites Back

Lockheed Martin and its friends at The Washington Post are still outraged that in 2010 the Council refused to pass a special law to give Lockheed Martin a unique tax advantage that would have cost the county $450,000 per year — at a time when the county was faced with draconian cuts to critical services. The county executive, at the behest of Lockheed Martin, had asked the council to change the legal definition of a hotel, specifically to exempt the patrons of Lockheed Martin’s new luxury hotel in Bethesda, MD from paying the county’s 7-percent hotel tax. The proposed law would have applied to no other facility in the county.

After hearing from citizens on this outrageous bill, the council tabled it and never voted on it, effectively killing it. As a result, patrons of the hotel, called the Center for Leadership Excellence (CLE), must pay the lodging tax, just like the patrons of every other hotel in the county. The Washington Post and Lockheed Martin consider this situation grossly unfair. The proposed grant is designed to recompense Lockheed Martin for two years worth of the tax.

Let’s put this tax exemption proposal in perspective by taking a quick look at Lockheed Martin’s finances. In 2010 the company took home $3.9 billion in profits from the portion of its business that is paid directly by taxpayers (84 percent). Lockheed Martin’s CEO, Robert Stevens, received $21.9 million in compensation in 2011.  So this company is doing quite well for itself, thanks to the taxpayers, and our largesse will continue into the future. One example: It is now estimated that the F-35, a Lockheed Martin product, will end up costing taxpayers a total of $1.5 trillion dollars. If you laid out $1.5 trillion end-to-end in $100 bills, you could circle the Earth at the equator 59 times.

Despite the extraordinary wealth of this company, The Washington Post believes that council members are being “craven” in requiring the CLE to remain subject to the county’s hotel tax, given that only Lockheed Martin’s personal invitees can stay at the CLE — that is, members of the public can’t make a reservation there. Let’s consider this argument a bit more closely. 

When Lockheed Martin’s own employees stay at the CLE, according to the Post, the corporation passes on the costs of the hotel tax to the appropriate federal contract. In other words, Lockheed Martin is already compensated by the federal government for any lodging costs the company incurs, and given federal procurement regulations, the company can charge indirect costs on top of the local taxes it pays. This means that Lockheed Martin gets its money back, with interest, on its employee lodging costs.

Even if Lockheed Martin didn’t get that money back, it would still make no sense to exempt this extremely wealthy company from paying a tax on employee lodging costs. The company also invites contractors and vendors to stay at the hotel. Why should these people not be required to pay a tax that they would pay if they instead chose to stay at the Marriott?

In reality, Lockheed Martin rents rooms to more than its employees, contractors and vendors. It uses its world-class conference center for . . . conferences. For example, the law school of the University of Southern California will hold a conference at the hotel in October. A registration form, available online until recently, asked conference participants to indicate whether they intended to stay at the CLE and pay a nightly rate of $225 during the conference or whether they would find their own accommodations. Since Lockheed Martin claims that the hotel is used almost solely for its employees—the bizarre rationale for the proposed tax exemption—this conference looks a bit suspicious. After citizens presented a copy of the conference registration form to the Montgomery county council during the public hearings on the budget, documenting that Lockheed Martin’s definition of “employee” is quite expansive, the form was removed from the website.

It is extraordinary that the company would make an issue of this tax. Although the amount of money—$450,000 per year—is significant to Montgomery County, it is essentially a rounding error for Lockheed Martin.

There’s more: not only are Lockheed Martin and The Washington Post furious at the county council for questioning the wisdom of a special million-dollar gift to Lockheed Martin to compensate it for having to pay the tax. They are also still irate that in 2011 the council briefly considered a non-binding resolution asking Congress to support the needs of local communities and cut military spending. Lockheed Martin suddenly had a job for a few of its 91 lobbyists: kill the resolution, which they did. Within a few days of Lockheed Martin bullying the council, a couple of council members were “persuaded” that the resolution was a bad idea. Since the resolution no longer had majority support, it was not brought up for a vote. 

The Politics of Jobs

In its recent editorial, the Post once again castigated the council for having had the gall to briefly consider a resolution that never even came up for a vote. “Last fall,” the Post editorialized, “council members flirted witha resolution urging Congress to spend less on national defense. They backed down once it dawned that defense contractors such as Lockheed are among Montgomery’s biggest employers. In effect, council members were advocating layoffs for their own constituents.” 

Contrary to The Washington Post’s assertion, the council did not decline to pass the resolution because it suddenly dawned on them that Lockheed Martin employs about 7,200 people in the county. Council members backed down under extreme political pressure, brought to bear on them from Lockheed Martin. In fact, the county is home to NIH, FDA, and other large federal agencies that employ far more people in the county than does Lockheed Martin. Without a reprioritization of federal spending, many people working in these agencies are quite likely to lose their jobs.

Even worse, the Post’s argument implies that the availability of local jobs supported by federal military contractors should deprive citizens of the ability to advocate a change in foreign policy and a say in the allocation of federal resources. Large military contractors, in fact, have distributed their subcontractors and their factories throughout the country in a politically astute manner. Economist and former Pentagon official Alain C. Enthoven once observed, “The ideal weapons system is built in 435 congressional districts and it doesn't matter whether it works or not."

In the 2009 fight by a coalition of advocacy groups to kill the F-22, a plane made by Lockheed Martin that no one in the Pentagon wanted—from Rumsfeld to Panetta—Lockheed Martin placed several full-page ads in The Washington Post that consisted solely of a list of every congressional district in the country, alongside Lockheed Martin’s estimate of how many jobs would be lost in each district if the F-22 was cancelled. So much for subtlety. The plane doesn’t work, it’s extremely expensive, and we don’t need it for our “security,” but note to Mr. or Ms. Congressperson: fund this plane or we’ll see that jobs will be lost in your district—one of which will be yours.

The Washington Post and Lockheed Martin are working in lock-step to intimidate anyone who questions the idea of a reallocation of federal resources away from the current excessive level of military spending. Moreover, they are also using their extraordinary power to coerce a local council to do their bidding in a blatant corporate welfare scam. 



Straight Talk on Social Security

Straight Talk on Social Security


By: Jared Bernstein

Rolling Stone

April 27, 2012


Here's what Social Security is not:


- going broke;


- a Ponzi scheme;


- expected to stop paying out benefits in your



- bankrupting our nation or future generations.


Here's what Social Security is:


- a critical source of income support for millions of



- an elegant and binding intergenerational contract

between yesterday's and today's workforces;


- a progressive social insurance program that

efficiently provides a reliable, affordable, guaranteed

pension to those past their working years.


- a national treasure to be fiscally strengthened and

carefully preserved for both today's elderly and for

future generations.


Some of these facts may surprise you, but I can and

will easily defend each one.


First, the finances.  You may have recently heard that

the trust fund from which Social Security benefits are

paid will be exhausted by 2033, three years earlier

than last year's forecast.   That exhaustion can and

should be avoided, and the sooner we take steps to do

so, the better (I'll suggest a few below).


But consider three things regarding this prediction.

First, as the figure below shows, this exhaustion date

is a moving target.  Most recently, you can clearly see

the impact of the recession in the trust fund's

erosion, because with fewer people working (or working

fewer hours at lower wages), the flow of payroll taxes

into the trust fund is diminished.   But as the economy

improves, the end date may be moved back in time, as

was the case in the 1990s.


Second, and this is widely misunderstood, as long as we

have an economy with a workforce, payroll taxes will

fund Social Security. (That's the intergenerational

compact: today's workers support yesterday's workers,

who are today's retirees.)  The problem is that unless

we turn up that flow (or lower the benefits), the taxes

coming into the system won't be enough, post-2033, to

pay the full benefits promised to those slated to

retire then. The inflow to the fund will, however, be

enough to pay 75 percent of those benefits.  Too many

people think that number is zero, i.e., they think that

when the trust fund exhausts, benefit payments go to

zero.  They do not.


Third, let's put the Social Security shortfall in

perspective.  Those who are running around saying a) we

should make the Bush tax cuts permanent, and b) we can

no longer afford to fully fund Social Security need to

deal with this fact: the long-term revenue loss from

extending just the highend part of the Bush cuts-the

part to the top 2% of households-is about equal to the

full trust fund shortfall.  It can't be the case that

we can afford tax cuts for the wealthiest yet our

fiscal future faces a dire threat from Social Security.


Why is this venerable program so important?  For the

average beneficiary, Social Security benefits comprise

two-thirds of their income.  That's a tough statistic

to wrap you head around, especially when you consider

that the average monthly benefit is about $1,200 right

now (implying that the household income of these

beneficiaries is around $22,000).  But it's the truth.


For the old elderly, it's even more important.  Among

those aged 80 or older, Social Security provides the

majority of family income for almost two-thirds of

beneficiaries and nearly all of the income for one-

third of beneficiaries.  Without their income from

Social Security, the poverty rate among elderly would

be 45 percent. With those benefits, it's 10 percent.


So I'm going to assume you're still with me; you

recognize that the program is not about to explode and

disappear, and want to know what will it take to

replenish the Social Security trust fund so we can bump

the 75 percent of expected benefit payments back up to

100 percent where it belongs.


There is a wide menu of steps we could take to fully

fund the program over the next 75-year accounting

horizon. Here are three:


1. The maximum salary to which the payroll tax is

applied is about $110,000 right now.  If you're someone

who earns more than that, you don't pay any payroll

taxes above that amount.  This maximum used to cover

about 90 percent of earnings, but because of the growth

of earnings inequality, it now only reaches about 84

percent.  Kicking it back up to 90 percent - around

$180,000 - would help close about a third of the

solvency gap.


2. The price index used to make cost-of-living

adjustments to Social Security is thought to overstate

the increase in inflation, leading to overpayment of

benefits relative to actual price changes.  Switching

to something called the "chained" Consumer Price Index

would close about a quarter of the fund's gap, but we

should be clear that this is a cut in benefits relative

to what folks get today and are scheduled to get in

later years.


3. The growth of employer-sponsored fringe benefits,

especially health care, has fueled cost pressures in

the health-care system and eroded the Social Security

tax base, as a rising share of workers' total

compensation has come in the form of untaxed benefits

rather than taxed wages.  We should consider gradually

applying the payroll tax to employer provided health

care benefits, which are currently not taxed at all.

This closes about 45 percent of the gap.


Those three get you pretty much there, in terms of

returning the trust fund to full solvency, but there

are many more options, including raising the retirement

age and reducing the benefits of the wealthy.  I'm wary

about raising the retirement age, in part because

increased longevity is a function of income, so that

low-income men are not living much longer than they did

a generation ago (since 1977, the life expectancy of

male workers retiring at age 65 has risen 6 years in

the top half of the income distribution, but only 1.3

years in the bottom half; we don't have this data for women).


No one's saying these are easy fixes.  Even brave

politicians fear suggesting any changes to this

extremely popular program (in his most recent budget,

President Obama proposes spending cuts to Medicare and

Medicaid, but doesn't touch Social Security). But given

the deep misperceptions noted above, and the fact that

so many younger Americans are increasingly buying into

the nonsense that Social Security won't be there for

them, there could be a receptive audience for the brave

soul with the courage to tell it like it is.


If I may be so bold as to suggest a script, here's the

way I wrote about this in my book All Together Now:

Common Sense for a Fair Economy,


    "Though I grant you we rarely discuss it in these

    terms, Security creates a strong link between the

    aged and the working-age population. The idea

    behind the program is that today's workers create

    the capital, the technology, and the wealth that

    will support tomorrow's generation. Embedded in its

    mind-numbing formulas is the notion that those of

    us who came before, whether they were teachers,

    accountants, homemakers, mail carriers, barbers,

    cashiers, or lawyers, have built up the productive

    capacity of our nation.


    "When the children of these workers come of age

    (along with new immigrants), they will earn their

    living from this infrastructure while also making

    their own contributions. As they do so, we will

    peel off some portion of their earnings to provide

    pensions for their forebears, just as those

    forebears did for their own predecessors. If this

    were a Disney movie, music about the "Circle of

    Life" would swell up here, but suffice it to say,

    Social Security is an elegant collaborative

    solution to a universal challenge."


Now, could you do me a solid?  Please spread this

gospel wherever and whenever you can.  I know we're a

long ways from Factville right now, but we'll never

find our way back there if we don't proclaim the

fundamental truth about what Social Security is and



social security graph Social Security Trustees' Report, 2012


You can email me at I look forward to your feedback.



Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities. From 2009 to 2011, he was

the Chief Economist and Economic Adviser to Vice President Joe Biden, executive director of the White

House Task Force on the Middle Class, and a member of President Obama's economic team.