Originally published Saturday, September 10, 2011 at 10:00 PM

Jon Talton

Bleeding the federal budget coffers dry

Besides the mounting human toll, the wars after 9/11 have wasted the opportunity to spend federal dollars on issues such as the environment and jobs.

Special to The Seattle Times

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In attacking the United States 10 years ago, one of Osama bin Laden's major goals was to provoke a hysterical American overreaction that would begin bleeding the nation into economic ruin.

Mission accomplished?

In 2001, the federal government was enjoying its second straight fiscal-year surplus. The Congressional Budget Office projected the surpluses would grow to almost $700 billion by 2009. Hard as it is to believe now, the government announced in October 2001 that it would discontinue selling the 30-year bond because it wouldn't need the money. Although Iraq had nothing to do with 9/11, the American invasion was sold as part of a larger "war on terror," which now includes the war in Afghanistan. The wars as well as other increased military spending, cost $1.469 trillion through the 2009 fiscal year, helping turn surpluses into deficit, according to the Center on Budget and Policy Priorities.

Nobel laureate economist Joseph Stiglitz and Linda Bilmes continue to stand by their 2008 forecast the wars would eventually cost from $3 trillion to $6 trillion.

They have been fought on credit. Instead, President George W. Bush pushed through tax cuts, heavily weighted toward the rich, that added another $1.8 trillion in red ink — and this was before their extension under President Obama last year. Lawmakers of both parties supported this ill-advised measure.

As with any economic event, there have been winners and losers.

If the biggest winners were defense contractors, taxpayers were among the losers.

For example, KBR, the former subsidiary of Halliburton, whose former chief executive was then-Vice President Dick Cheney, won $37 billion in mostly no-bid contracts to supply goods and services to the troops. An analysis by the Center for Public Integrity found that the value of Pentagon contracts awarded without competition increased to more than $140 billion in 2010, compared with $50 billion in 2001.

Not surprisingly, fraud and abuse became common. Eight billion dollars — worth more than five years of federal support for Amtrak — went missing in Iraq. A new report from the congressionally appointed Commission on Wartime Contracting finds that at least $31 billion in cash to contractors was lost to corruption or incompetence. The number might be as high as $60 billion. And it contributed "little or no benefit" to the war effort.

About $75 billion is spent annually by federal and state governments on security for the "homeland," a strangely un-American-sounding word that entered the lexicon after 9/11. The Washington Post assembled a database of 2,000 companies involved in this massive domestic-security enterprise.

Some of the spending undoubtedly makes sense, such as improving protection of the nation's ports and airports. The Port of Seattle spent approximately $23 million on seaport-security projects over the decade. It spent another $245 million at Seattle-Tacoma International Airport, of which $230 million went to in-line baggage screening. The total for the Port of Tacoma is $32.6 million.

Yet an investigation by the Los Angeles Times found many instances of questionable spending on anti-terror measures. Among them: a Department of Homeland Security grant of $42,000 to buy advanced dive gear for Keith County, Neb., which has a population of 8,370. The increasing militarization of law enforcement, complete with armored vehicles, has been a result of massive increase in funding, even if it is used for ordinary crimes, not fighting terrorists.

The losers also include what might have been, either without 9/11 or with a different American response.

The United States has taken no serious steps to address either climate change or looming worldwide oil scarcity, both of which will prove to be major national-security challenges as well as costly to the economy.

Our infrastructure is falling ever further behind that of other advanced nations. Education, the essential element to competitiveness, continues to falter, especially for the middle class and working poor.

Even without an attack, America entered a new economy in the 2000s, and not the happy-techie kind hyped at the end of the century. It was the beginning of the Great Disruption.

China came into the World Trade Organization and ended the decade as the world's second-largest economy. Its state capitalism, as well as rising competition from India and other emerging powers and a surplus of cheap labor, proved catastrophic for tens of thousands of American manufacturers.

The development of smartphones and social networking in the decade couldn't make up for the increasing pressure on average Americans, from stagnant and falling wages to high income inequality and the loss of upward economic mobility.

Even without an attack, the nation would have faced the dot-com bust and then embarked on the massive Ponzi scheme of the housing bubble, abetted by the Federal Reserve and a dangerously deregulated banking system.

The resulting Great Recession ruined millions financially and added the third biggest driver of the deficit after tax cuts and wars. The lingering effects, especially large-scale unemployment and the overhang of debt, threaten long-term damage.

The tragedy is that America still lacks an exit strategy — from any of these challenges and follies. Instead, continuing economic turmoil seems likely, abetted by intensifying political paralysis and bitterness.

In 2003, Gen. David Petraeus famously said, "Tell me how this ends." He was speaking of the Iraq war. But he might as well have been asking about the choices made for an entire lost decade.

It's a question that still haunts America.

Jon Talton:

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About Jon Talton

Jon Talton comments on economic trends and turning points, putting them into context with people, place and the environment in the Pacific Northwest


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