by
Michael S. Rozeff

Recently
by Michael S. Rozeff: Suffering
Under Improper Banking Practices and Government Monetary Laws

Obama has not
cut defense spending during his first term. Under Obama, defense
spending has been (in billions) $794 in 2009, $847.2 in 2010, $878.5
in 2011, and $902.2 in 2012. It’s slated to be $901.4 in 2013.

Mitt Romney
wants to increase
defense spending substantially. Romney speaks only of increasing
defense spending further.

Barney Frank
wants to reduce defense spending significantly. He
says “We could easily save more than $200 billion without
in any way endangering our security.” He also says “Let’s
bring the troops home.” He’s on the right track, only he is
not radical enough.

Harry Truman
cut defense spending by very large amounts after World War II. Defense
spending during that war peaked out at $93.7 billion in 1945. By
1947, it was down to $22.8b. In 1948, it was $19.7b.

The Truman
reductions in defense spending in percentage terms were over
75 percent. Cuts of this size can be done again today without
loss in security. Whatever dangers and threats America faces in
2012 are not worse than in 1947 and 1948.

In the late
forties, the West viewed Communist governments in Eastern Europe,
in East Germany, in China and in other places in Asia and the world
as major threats. The Soviet Union and Red China developed the atomic
and hydrogen bombs. These views led to budget increases and a war
in South Korea. Consequently, the U.S. government took defense spending
back up to the $50b. level.

That resurgence
was unnecessary. Today we know that the economic success of communism/socialism
in all of these countries was greatly exaggerated, and that they
were not the threats that the U.S. government supposed they were.
Today we know that the Austrian economist Ludwig von Mises was absolutely
correct, decades earlier, in analyzing and then forecasting the
impossibility of a successful socialist economy. We know that these
systems were prolonged by underground capitalism, by western food
and other aid, and by food grown on small private plots of land.

This being
the case, we can say with great assurance that today there is no
remotely comparable threat to U.S. security in the form of terrorism
or anything else. Furthermore, whatever threat there is could be
reduced to a mere flyspeck by more enlightened U.S. policies.

Peaceful growth
is a magnet that reduces threats to America. The only possible economic
system that’s consistent with widespread progress and peaceful growth
is capitalism. Wherever there is some degree of progress, there
is some degree of capitalism. Wherever there is some degree of capitalism
being hampered by governments, there will be found negative effects
on progress. Huge swaths of the world have moved in the direction
of free markets and private property rights. They have moved, however
haltingly, slowly and imperfectly toward peaceful growth via capitalism.
This movement and global transformation reduces threats to America.
This is the movement that the U.S. needs to recognize explicitly
and encourage. It needs to do this at home as much as abroad.

The engine
of peace, justice and security is not armaments. It is not drones.
It is not wiping out terrorists. It is not a worldwide network of
military bases. It is not continual warfare. It is not the imposition
of sanctions. It is not in fomenting revolutions. It is not in choosing
some nations as allies and others as enemies. It is not in making
alliances with other nations that make them virtually protectorates
of the U.S.

If the U.S.
government would aim its own policies away from military structures
and methods and toward free markets and capitalism, then it would
reduce the possible threats even more. The U.S. is a leading government.
It can encourage global win-win situations with appropriate economic
policies at home and abroad.

Higher real
incomes result from capital accumulation in free markets with secure
property rights. This process produces goods in demand. Welfare
goes up.

By
contrast, taxes remove capital from the private sector where it
can do some good and send it to Washington where it’s wasted on
useless defense spending.

A 75 percent
cut in defense spending accompanied by a tax cut that returns the
money to the private sector will provide a huge stimulus to economic
growth. Returning the money via tax cuts is absolutely essential
to generate growth, because then the money can, if desired, go into
capital accumulation. Merely shifting defense spending into other
categories of government spending like education and social spending
will be totally useless in generating economic growth since these
forms of spending, being consumption financed by taxes, do not create
capital goods and economic growth.

I have chosen
75 percent in this article because Harry Truman did this. By comparing
his era to ours, I hoped to make clear that we know such cuts are
feasible because today’s threats are no worse than in his days.
What America did two generations ago can be done again. Furthermore,
defense cuts are but one step among many that can get America on
the right track.

July
9, 2012

Michael
S. Rozeff [send him mail]
is a retired Professor of Finance living in East Amherst, New York.
He is the author of the free e-book Essays
on American Empire: Liberty vs. Domination and the free e-book
The U.S. Constitution
and Money: Corruption and Decline.