18th edition - september 6, 2011

8/4/2019 18th Edition - September 6, 2011

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IntroductionAnd Heres The Good News

Podcasters WayBackground Briefing

Alan LichtmanPolitical PredictionsThe Encyclopedia of Earth

Jimmy CarterEnergy and National Goals (Crisis ofConfidence)

The Class War Battlefield PodcastEpisode 1Obama and Special Interests

The Activists DeskDefense-Aerospace.com

Op-Ed: Why Its Time to Nationalize the US Defense Industry

Hot off the PressesCenter on Budget and Policy Priorities

Raising Medicares Eligibility Age Would Increase OverallHealth Spending and Shift Costs to Seniors, States and

Employers

The DigThe American Prospect

Conversion Then and Now: Throwing Swords into PlowsharesRequires a Plan

Real MoneyThe Business Insider

The Psychology of Americas Debt Problem: Denial, Anger,Bargaining, Depression, Then Acceptance

Dateline:

The Unseen WorldArab News.com

Libyas Next Fight: Foiling Western Designs

At The World BurnsCenter for Investigative ReportingGlobal Carbon Markets Dirty Secret

Corp Watch

Killing Clean Energy Laws Tar Sands Lobby Does Washington

A Break with

HistoryHistory News Network

There is no Business Like Show Business and No History Likethe History of it

The ExchangeThe Free Library

Can Taxpayers Count on a Peace Dividend

Transcripts &

InterviewsInformation Clearing House

Chomsky on Adam Smith What We Would Call capitalism hedespised


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And HERES THE GOODNEWS

Epic T-shirt fail: "I'm too pretty to do my

homework so my brother has to do it for

me"Lylah M. Alphonse, Senior Editor, Manage Your Life

Wed Aug 31, 2011 11:31am PDThttp://shine.yahoo.com/channel/parenting/epic-t-shirt-fail-quot-im-too-pretty-to-do-my-homework-so-my

brother-has-to-do-it-for-me-quot-2537106A few months ago, the Internet was up inarms over a white David & Goliath T-Shirtthat read, in pink bubble letters, "I'm toopretty to do math." Then there was the onewith "Future Trophy Wife" written on it.

But many parents think this one is worse.

The long-sleeve T-shirt that J.C. Penneypulled off its website today amid plenty ofparental outrage read: "I'm too pretty to domy homework so my brother has to do itfor me." And, judging by the descriptionof the shirt on the J.C. Penney website"Who has time for homework whentheres a new Justin Bieber album out?Shell love this tee thats just as cute andsassy as she is"it seems like thecompany didn't have a problem with theshirt until customers started to complain.

Thanks, major clothing retailers. Westruggle to teach our girls that beauty isn'teverything, that they don't have to playdumb in order to be popular, that womencan be both smart and pretty. But, eventhough studies show that girls are as goodat math as boys, even with beautiful moviestars earning Ivy League degrees inbetween blockbuster hits, the stereotypespersistthanks in large part to messageslike the one on that "cute and sassy" T-

shirt marketed to girls age 7 to 16.

The controversy started late Tuesdaynight, when clothing designer MelissaWardy saw a tweet about the T-shirt andthen shared the linkon her Facebook page.

"I advocate for girls and against this kindof gender stereotyping in themarketplace," she said in an interview withYahoo! Shine. "My little girl startskindergarten tomorrow... I don't want herto see a shirt like that on her classmate,something saying that pretty is cute andright and the academics should be left tothe boys."

"It incorporates all of the wrong messagesfor girls," she adds. "Why are weconditioning kids to wear something thatdegrades their self-worth?"

Tired of girls' clothing that focused on"looks, shopping, or hyper-hyper-girliness," Wardy launched her own line ofapparel, called Pigtail Pals, in 2009. Shespent Wednesday designing a T-shirt ofher own in response to the "I'm too prettyto do homework" message. "Girls deservebetter products in the marketplace," Wardysays. Her new shirt, adorned with stars andswirls in a rainbow of colors reads,"Pretty's got nothing to do with it" on the

front and "Redefine girly" on the back.

"There's nothing wrong with being girly,"Wardy says. "I'm not anti-pink. I'm notanti-princess. I'm anti-limitations."

J.C. Penney removed the T-shirt onWednesday and issued this statement:"J.C. Penney is committed to beingAmerica's destination for great style andgreat value for the whole family. We agreethat the 'Too pretty' t-shirt does not deliveran appropriate message, and we haveimmediately discontinued its sale. Ourmerchandise is intended to appeal to abroad customer base, not to offend them.We would like to apologize to ourcustomers and are taking action to ensurethat we continue to uphold the integrity ofour merchandise that they have come toexpect."

Anyone remember Teen Talk Barbie, whocomplained "Math class is tough!" whenyou pressed a button on her back?
http://shine.yahoo.com/blog/Z6YBLJXKTM6A5JQXJNTYLCFVCY/http://shine.yahoo.com/channel/parenting/epic-t-shirt-fail-quot-im-too-pretty-to-do-my-homework-so-my-brother-has-to-do-it-for-me-quot-2537106/http://shine.yahoo.com/channel/parenting/epic-t-shirt-fail-quot-im-too-pretty-to-do-my-homework-so-my-brother-has-to-do-it-for-me-quot-2537106/http://www.davidandgoliathtees.com/catalogsearch/result/?q=math&send=http://www.davidandgoliathtees.com/catalogsearch/result/?q=math&send=http://shine.yahoo.com/channel/parenting/5-t-shirts-you-should-never-ever-let-your-kid-wear-to-school-2517314http://moms.today.com/_news/2011/08/31/7539556-im-too-pretty-to-do-homework-so-my-brother-has-to-do-it-for-mehttp://shine.yahoo.com/channel/sex/quot-2-2-what-quot-do-women-play-dumb-to-impress-men-2528557http://shine.yahoo.com/channel/sex/quot-2-2-what-quot-do-women-play-dumb-to-impress-men-2528557http://shine.yahoo.com/channel/beauty/can-you-be-both-pretty-and-smart-we-found-the-answer-2463583http://shine.yahoo.com/channel/parenting/girls-are-just-as-good-at-math-as-boys-220048http://shine.yahoo.com/channel/parenting/girls-are-just-as-good-at-math-as-boys-220048http://www.facebook.com/PigtailPals/posts/168616993214304http://pigtailpals.com/http://www.pigtailpals.com/prgotnotodow.htmlhttp://shine.yahoo.com/channel/parenting/11-bad-barbie-ideas-1312923http://www.youtube.com/watch?v=NO0cvqT1tAEhttp://www.youtube.com/watch?v=NO0cvqT1tAEhttp://shine.yahoo.com/channel/parenting/11-bad-barbie-ideas-1312923http://www.pigtailpals.com/prgotnotodow.htmlhttp://pigtailpals.com/http://www.facebook.com/PigtailPals/posts/168616993214304http://shine.yahoo.com/channel/parenting/girls-are-just-as-good-at-math-as-boys-220048http://shine.yahoo.com/channel/parenting/girls-are-just-as-good-at-math-as-boys-220048http://shine.yahoo.com/channel/beauty/can-you-be-both-pretty-and-smart-we-found-the-answer-2463583http://shine.yahoo.com/channel/sex/quot-2-2-what-quot-do-women-play-dumb-to-impress-men-2528557http://shine.yahoo.com/channel/sex/quot-2-2-what-quot-do-women-play-dumb-to-impress-men-2528557http://moms.today.com/_news/2011/08/31/7539556-im-too-pretty-to-do-homework-so-my-brother-has-to-do-it-for-mehttp://shine.yahoo.com/channel/parenting/5-t-shirts-you-should-never-ever-let-your-kid-wear-to-school-2517314http://www.davidandgoliathtees.com/catalogsearch/result/?q=math&send=http://www.davidandgoliathtees.com/catalogsearch/result/?q=math&send=http://shine.yahoo.com/channel/parenting/epic-t-shirt-fail-quot-im-too-pretty-to-do-my-homework-so-my-brother-has-to-do-it-for-me-quot-2537106/http://shine.yahoo.com/channel/parenting/epic-t-shirt-fail-quot-im-too-pretty-to-do-my-homework-so-my-brother-has-to-do-it-for-me-quot-2537106/http://shine.yahoo.com/blog/Z6YBLJXKTM6A5JQXJNTYLCFVCY/


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URLsJimmy Carters: Energy and National Goals

http://www.eoearth.org/article/Jimmy_Carter%27s_%22malaise_speech%22#

Background Briefings: Alan Lichtmanhttp://ianmasters.com/content/january-13-2011-obamas-speech-and-american-politics-lebanon-and-hezbollah

Class War Battlefields: Introduction & Episode 1 (The Ten exclusive)http://jumbofiles.com/j5y0njqpm0elhttp://jumbofiles.com/2lh81x5075dmComments can be sent [email protected]

This Just In! Youtube Clip!

The Big Picture: The Latest Slap in the Face to 9/11 RespondersAccording to Mayor Bloomberg, first responders are not invited to this Sundays 9/11 tribute.Thanks to Wendy for sending me this clip!http://www.youtube.com/watch?v=4-plvBPBOkY&feature=channel_video_title
http://www.eoearth.org/article/Jimmy_Carter%27s_%22malaise_speech%22http://www.eoearth.org/article/Jimmy_Carter%27s_%22malaise_speech%22http://ianmasters.com/content/january-13-2011-obamas-speech-and-american-politics-lebanon-and-hezbollahhttp://ianmasters.com/content/january-13-2011-obamas-speech-and-american-politics-lebanon-and-hezbollahhttp://ianmasters.com/content/january-13-2011-obamas-speech-and-american-politics-lebanon-and-hezbollahhttp://ianmasters.com/content/january-13-2011-obamas-speech-and-american-politics-lebanon-and-hezbollahhttp://jumbofiles.com/j5y0njqpm0elhttp://jumbofiles.com/j5y0njqpm0elhttp://jumbofiles.com/2lh81x5075dmhttp://jumbofiles.com/2lh81x5075dmmailto:[email protected]:[email protected]:[email protected]://www.youtube.com/watch?v=4-plvBPBOkY&feature=channel_video_titlehttp://www.youtube.com/watch?v=4-plvBPBOkY&feature=channel_video_titlehttp://www.youtube.com/watch?v=4-plvBPBOkY&feature=channel_video_titlemailto:[email protected]://jumbofiles.com/2lh81x5075dmhttp://jumbofiles.com/j5y0njqpm0elhttp://ianmasters.com/content/january-13-2011-obamas-speech-and-american-politics-lebanon-and-hezbollahhttp://ianmasters.com/content/january-13-2011-obamas-speech-and-american-politics-lebanon-and-hezbollahhttp://www.eoearth.org/article/Jimmy_Carter%27s_%22malaise_speech%22


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Op-Ed:

Why It's Time to Nationalize the

US Defense IndustryJohn Stanton

(Source: History News Network; published July 24, 2006)http://www.defense-aerospace.com/article-view/feature/71678/op_ed%3A-is-it-time-to-nationalize-the-us

defense-industry%3F.htmIn 1969 John Kenneth Galbraith penned apiece for the New York Times titled TheBig Defense Firms Are Really PublicFirms and Should be Nationalizedarguing, among other things, that it wasfolly for defense contractors to claim that

they were private corporations. Suchclaims made a mockery of free enterprise.

Nearly 40 years hence, Charlie Cray andLee Drutman have resurrected andenergized Galbraiths argument in theirwork titled Corporations and the PublicPurpose: Restoring the Balance (SeattleJournal for Social Justice, Winter 2005).They make an exceptionally compellingcase for putting the defense industrial base(DIB) into the direct service of theAmerican public through a form ofnationalization: federal chartering.

Converting the companies to publicly-controlled, nonprofit status wouldintroduce a key change: it would reducethe entities impetus for aggressivelobbying and campaign contributions.Chartering the defense contractors at thefederal level would in effect allowCongress to ban such activities outright,thereby controlling an industry that is nowa driving force rather than a servant offoreign policy objectives. As public firms,

they would certainly continue toparticipate in the policy for a designed todetermine the nations national securityand defense technology needs, but theprofit-driven impetus to control theprocess in order to best serve corporate

shareholders would be eliminated. Thus,by turning defense and security firms intofull public corporations, we would replacethe criteria by which their performance isjudged from quarterly earnings targets tocriteria that is more consistent with thenational interest.

If Cray and Drutmans notion seemsradical, its only thanks to a fanciful storytelling by those who move back and forththrough the revolving, and always open,doors of the national security apparatusthat link the Department of Defense, the

US Congress, and the players who dot theDIB landscape. Apologists for the DIBhave always distorted the importance ofthe defense industry to the nation'ssecurity, particularly after the demise ofthe Soviet Union. They really believe thattheir industry should get specialrecognition for producing the goods andservices used to wage war. To sell thatconcept, they've made sure that thedifference between contractor anduniformed government employee is

completely blurred. With that, it'simpossible to know who is protecting thebalance sheet and who is protecting the USConstitution. In short, they've sold thepublic good.

There's a lot of evidence to show that theDIB is not functioning in the nation's bestinterest. Two interesting studies stand out.An April 2005 report by the GovernmentAccounting Office titled Defense Logisticstook a hard look at the system that suppliesUS troops in Iraq and concluded that itneeded repair. The pipeline failed todeliver basic supplies, such as MRErations, in a timely manner. Another fromthe National Defense University (seebelow) indicated that defense isnt reapingbroad benefits from informationtechnology. That does not bode well for

the push to network-centric warfare.

The inability of the Pentagon to accountfor billions in missing funds here at homeand in Iraq, ongoing criminalinvestigations spread across the entirenational security landscape, andsensational resignations, arrests andconvictions are unprecedented in UShistory. There is more here than just a fewbad apples. It is a systemic problemmade worse by the absence of leadership
http://www.defense-aerospace.com/article-view/feature/71678/op_ed%3A-is-it-time-to-nationalize-the-us-defense-industry%3F.htmlhttp://www.defense-aerospace.com/article-view/feature/71678/op_ed%3A-is-it-time-to-nationalize-the-us-defense-industry%3F.htmlhttp://www.defense-aerospace.com/article-view/feature/71678/op_ed%3A-is-it-time-to-nationalize-the-us-defense-industry%3F.htmlhttp://www.defense-aerospace.com/article-view/feature/71678/op_ed%3A-is-it-time-to-nationalize-the-us-defense-industry%3F.html


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at the highest levels. There is self-interest,to be sure, but that is different fromleadership. The American public is rapidlydiscovering that those running the show inthe national security machinery aren'tnecessarily interested in what's best forthem or the USA.

Fierce Competition? Show Me the Data!

According to a formula that measuresmarket concentration, the Herfindahl-Hirschman Index, the DIB is not acompetitive industry. At a recent Centerfor Strategic and International Studiespanel discussion on the DIB (csis.org), oneparticipant warned that the myth ofcompetition in the DIB might be exposed.Some federal agencies use this index[Herfindahl-Hirschman Index] to establishguidelines for when you have to startworrying about the absence ofcompetition.

Competition is supposed to be a hallmarkof the acquisition system that weve hadsince the end of World War II, but withonly two big firms--which is the case forsome categories of military equipmentprovided by our industrial base--there islittle competition in the traditional sense.In fact, this situationtwo firms thatdivide market sharehas a name:duopoly. Not monopoly, but duopolyand its pretty tough to brand duopolycircumstances fierce competition.

The American public is led to believe thatthe DIB is unmatched in the broadapplications of information technology.Not quite. An astonishing report by theNational Defense University titledBringing Defense into the InformationEconomy (David Gompert and PaulBracken--March 2006) indicates that thePentagon and its minions are still trying tofigure out how to get into the informationage. One thing is clear [that] thephenomenon of increasing capability atdeclining cost now common in retail,financial services, telecommunications andother sectors remains uncommon indefense. To that, DIB apologists retortthat the defense industry is different. ButGompert and Bracken will not buy into theparty line.

Defense is different is a self-fulfillingexcuse that perpetuates poor price-performance and deprives national defenseof the benefits of larger, faster, moredynamic, and more inventive IT markets.

It condones expensive adaptation andintegration services. Moreover, byexaggerating the difficulty of applying ITto defense, this hypothesis legitimizes theceding of government responsibility. Itimplies that the challenge of managing,adapting, and integrating IT into militarycapabilities is so daunting for DOD that itmust be left to defense contractors

Profiles in Protecting the Status Quo: TheVoice of the DIB

Misconceptions About the DefenseIndustry (National DefenseJuly 2006,ndia.org), authored by Larry Farrell,president of the National DefenseIndustrial Association, is representative ofdefense industry's world-view. Farrell, aretired USAF Lieutenant General, doesntbelieve the American people understandthe importance of his industry to nationalsecurity. He thinks that the defense

industry needs to get out there and tell itsstory because it will be criticallyimportant with the coming resourcecrunch, when the Defense Department willhave to justify acquisitions and forcestructure costs against calls forreallocation of resources to other nationalneeds. OK, fair enough. But what kind ofstory will the American public get?

He divines that the first thoughts that cometo the public mind when asked about theDIB are $600 toilet seats, $400 hammers

(actually they were $450 a piece), warprofiteering, Eisenhowers oft citedmilitary-industrial complex thesis,scandals, and reports critical of the DIB.Naturally, Farrell blames the media forfaulty reporting on the $600 toilet seat partand $450 hammers.

The NDIA president takes the reader backto World War I and proclaims that theonly things we took to war [WWI] thatwere truly American made were theSpringfield rifles and our fighting spirits.Huh?

It is true that US artillery pieces appearedlate in the conflict and that the US had tobuy aircraft and other weaponry from theBritish and French. The US Navy foughtin WWI, at least according to the USArmy and Navy historical offices. In 1916,American-made Navy destroyers, six ofthem, were escorting British cargo ships toprotect the Brits from German submarineattacks. A US Navy Admiral, WilliamSims, convinced the British Admiralty to

change its ship formations to a convoypattern. In the end, 37 US destroyersparticipated in the effort significantlyreducing cargo losses to the German U-Boats.

American made ships--one produced byNewport News Shipbuilding, the USSFanning (DD 37)and the the other byWilliam Cramp & Sons, the USSNicholson (DD 52), sunk a U-Boat in1917. And, in quite a feat of industrialproduction, 1200 American-made M1917Browning machine guns were used late inWWI.

Its worth noting an event of those daysthat was putting some strain on the USArmy in 1916. The US Army had itsattention focused on the Mexican border.The American public was more concernedabout securing the Mexican border fromthe likes of Pancho Villa (attack on

Columbus, NM killed 25 Americans) thanwar in Europe. At the height of theMexican Campaign, some 150,000national guard troops were deployed alongthe US and Mexico border with another8,000 US Army infantry led by GeneralJohn Pershing.

In the editorial, Farrell attempts mightilyto challenge the stigma of war profiteer,but his argument about the toughallocation of resources ends in languagethat is precisely that of a war profiteer

hunting for profits in the midst of resourcescarcity. This argumentfocused as it ison the corporate interest, ignores thelifetime-care costs for the some 18,356wounded in Afghanistan and Iraq (and,one supposes, hundreds more woundedduring Special Operations and intelligenceactivities all over the globe). The payraises, increases in housing allowances andmedical benefits over the past few years,for those in the military that matter most,are paltry compared with the bonuses,stock options and salary increases receivedby DIB leaders, and their partnersthroughout the national securitymachinery.

Finally, the American public doesn't heartoo much about the Lockheed Martincontracts to upgrade Chinese air trafficcontrol systems. We Never Forget WhoWe Work For, says Lockheed. Boeingrecently deployed the Sea Based X-Bandradar system that's floating off the coast ofHawaii. The platform for thattechnological marvel was built by Vyborg


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Shipping, a Russian firm. Is it really NorthKorea the Missile Defense people areinterested in, or is it the Russian arsenal?

Will the story defense industry provides bethe complete or redacted version?

Full Spectrum Corruption

According to Cray and Drutman, thegrowth of private military firms andcorporate intelligence contractors in thepast decade has created additional profit-making pressures on national securitypolicymaking processes. Interlockingrelationships exist between the largestdefense contractors and the Pentagonincluding corporate representation on keydefense planning boards, and the regularpassage of Pentagon and industrypersonnel through the proverbial revolvingdoor; that is, to the private sectorcompanies that they formerly oversaw.

The result is a steady stream of abusivecontracting practices and a potentiallydangerous distortion of American nationalsecurity objectives. Another result ofdefense contractors influence overCongress and defense policy boards is along-term commitment to the developmentof high-tech weapons systems that onlyspecific contractors are able to produce.These weapons systems arguably havelittle to do with preventing acts ofterrorismone of the nations current

greatest security concerns.

The interlocking relationships referred toby Cray and Lutman have led tospectacular levels of corruption.Convictions, resignations, investigationsand ethically challenged actions plague thenational security machinery. More badnews from the expanding Randy DukeCunningham investigation is likely tofurther rock the decrepit system.

Some of the more troubling public casesinclude:--William H. Swanson, Chairman andCEO of Raytheon, who lifted majorportions of his book Unwritten Rules fromanother author. He was censured and hadhis paycheck cut by the Raytheon Board ofDirectors.--Randy Duke Cunningham, former USCongressman and Chair of the US HouseIntelligence Subcommittee, is serving an8.4 year sentence in federal prison forfraud and taking bribes.

--Jerry Lewis, the Chair of the US HouseAppropriation Committee, is underinvestigation by the FBI.--Porter Goss, former US Congressmanand CIA Director is also the subject of anFBI investigation.--In May 2006, Reuters reported that theFBI was investigating allegations that fourstar USAF Generals Michael Moseley andJohn Jumper helped to steer a Thunderbirdcontract (the USAF equivalent of the USNavy's Blue Angels stunt flying team) to afriend, retired USAF General HalHornburg, who once commanded theThunderbirds.

Corporate Watch (corpwatch.org) is aninvaluable tool for tracking the activitiesof the players in the DIB. The groupreported on what, perhaps, is morefrightening than the explosion ofcorruption in the US national securityarena: the commercialization of the

uniformed military services to the pointwhere distinguishing between corporateoperative and uniformed governmentemployee is impossible.

One of Raytheon's more secretivesubsidiaries is E-Systems, whose majorclients have historically been the CIA andother spy agencies like the NationalSecurity Agency and the NationalReconnaissance Office. An unnamedCongressional aide told the WashingtonPost once that the company was 'virtually

indistinguishable' from the agencies itserves. Congress will ask for a briefingfrom E- Systems and the (CIA) programmanager shows up, the aide is quoted assaying. 'Sometimes he gives the briefing.They're interchangeable.''

What is the US Military? What is beingDefended?

Ultimately, the entire national securityapparatus is going to have to make somedecisions. Is it country before agency? Is itprofit before country? Is it the USCongress saying No to campaigncontributions? P.W. Singer, who monitorsthe DIB for the Brookings Institution, putthe issue into perspective.

The final dilemma raised by the extensiveuse of private contractors involves thefuture of the military itself. The armedservices have long seen themselves asengaged in a unique profession, set apartfrom the rest of civilian society, whichthey are entrusted with securing. The

introduction of private military firms, andtheir recruiting from within the militaryitself, challenges that uniqueness and themilitary professional identity. Itsmonopoly on certain activities is beingencroached on by the regular civilianmarketplace.

On Singer's latter point, the civilian andactive duty US military leadership isaggressively encouraging the commercialmarketplace to take on more militaryfunctions. That tactic is being pursued notjust for cost savings (dubious as thosemight be), but also to avoid publicoversight and the fallout that would comefrom being accountable for improprietiesranging from over-billing to thedeveloping of torture techniques.

And what about the status of the USA, itspeople and its infrastructure, that thenational security apparatus is supposed to

be defending? A day may come whenthere is not much worth fighting for.

The FBI reports that violent crimeincreased in 2005 to its highest rate in 15years. The American Society of CivilEngineers says it'll take almost $2 trillionto repair water systems, roads, schools andelectrical grids. Nobel Laureate JoeStiglitz says the total costs of the currentIraq War will cost another $2 trillion. TheCatholic Conference for HumanDevelopment indicates that 37 million

Americans live in poverty. The US CensusBureau reports that 45 million Americanscan't afford health insurance.

On top of that, add a trillion dollars tofully repair hurricane-damaged NewOrleans, Louisiana, and cover the costs ofneighboring state governments as theyabsorb hundreds of thousands of displacedAmericans from New Orleans. Federaldebt, and personal debt is at record levels.The home front is decaying.

Public good, and the ideals it is based on,must trump private greed. If not, what's thepoint of this Republic?

(Mr. Stanton is a Virginia-based writerspecializing in political and nationalsecurity matters. His last book is titled APower But Not Super. Reach him [email protected].)
mailto:[email protected]://www.defense-aerospace.com/page/home.htmlmailto:[email protected]


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Raising Medicares Eligibility Age Would

Increase Overall Health Spending and ShiftCosts to Seniors, States, and EmployersByPaul N. Van de Water

August 23, 2011http://www.cbpp.org/cms/index.cfm?fa=view&id=3564

Raising Medicare's eligibility age from 65to 67, which the new Joint SelectCommittee will likely consider this fall asa deficit-reduction measure, would notonly fail to constrain health care costsacross the economy; it would increasethem.

While this proposal would save the federalgovernment money, it would do so byshifting costs to most of the 65- and 66-year-olds who would lose Medicarecoverage, to employers that provide healthcoverage for their retirees, to Medicarebeneficiaries, to younger people who buyinsurance through the new healthinsurance exchanges, and to states.

The principal study of the effects of

raising the Medicare eligibility age, by theKaiser Family Foundation, estimates thatits increased state and private-sector costswould be twice as large as the net federalsavings. If the proposal were fully ineffect in 2014, Kaiser estimates, it wouldgenerate $5.7 billion in net federal savingsbut $11.4 billion in higher health carecosts to individuals, employers, and states.

The fundamental purpose of deficitreduction is to strengthen the economy

over the long term. The relentless rise inhealth care costs is the key driver ofprojected long-term deficits that policy-makers must address. But reducing

federal health care costs by raising stateandprivate-sectorhealth care costs evenmore makes little sense, as it onlyincreases the burden that health care costsplace on the economy as a whole. Thegoal should be to slow the growth ofhealth care costs system-wide, whileextending coverage to all Americans. Thisproposal does just the opposite on bothfrontsraising costs system-wide andincreasing the ranks of the uninsured.

The Kaiser report found that ifpolicymakers raised the Medicareeligibility age to 67:

65- and 66-year-olds would facehigher out-of-pocket health carecosts, on average. Two-thirds ofthis group3.3 million peoplewould face an average of$2,200 more each year inpremiums and cost-sharingcharges.

State Medicaid costs would riseas some of those who lostMedicare coverage (those with

the lowest incomes) would obtaincoverage through Medicaidinstead.

Scheduled Increase in Social Security's

Full Retirement Age Is Not a Sound

Reason to Raise Medicare Eligibility Age

Some people contend that policymakersshould raise Medicare's eligibility age to67 to match the scheduled increase inSocial Security's "full retirement age" to67. This argument may seem plausible atfirst blush. But in reality, it reflects amisunderstanding of how Social Securityworks.

Most Social Security beneficiaries do notbegin drawing benefits at Social Security's

"full retirement age." To the contrary,about halfof Social Security retirementbeneficiaries begin to draw benefits at age62, and two-thirds begin to draw benefitsbefore 65.a

If a beneficiary does not claim benefits at62, his or her monthly benefit is increasedon an actuarial basis for each month thatthe beneficiary delays claiming, upthrough age 70, so that the expectedlifetime value of benefits remains about the
http://www.cbpp.org/experts/index.cfm?fa=view&id=26http://www.cbpp.org/experts/index.cfm?fa=view&id=26http://www.cbpp.org/cms/index.cfm?fa=view&id=3564http://www.cbpp.org/cms/index.cfm?fa=view&id=3564http://www.cbpp.org/experts/index.cfm?fa=view&id=26


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same. Indeed, Social Security's "fullretirement age" (sometimes called the"normal retirement age"), now 66 andscheduled to increase to 67, has become amisnomer. It is not the age at which mostretired workers claim benefits, nor is it theage of claiming that produces the highestmonthly benefit.

Raising the age of eligibility for Medicarethus would not better align Medicare andSocial Security. The programs are notcurrently aligned, since there is a lag of upto three years between when most peopleclaim Social Security and when theybecome eligible for Medicare. And raisingthe Medicare eligibility age would pushthe two programs further out of alignment,rather than bringing them closer together.

a Owen Haaga and Richard W. Johnson,"Social Security Claiming and theBusiness Cycle," paper prepared for the

annual conference of the RetirementResearch Consortium, August 4, 2011.

Employer costs would rise asmore 65- and 66-year-olds whoseemployers offered coverage totheir retirees received primarycoverage through their employerrather than Medicare.

All Medicare beneficiaries wouldpay higher premiums because theremoval of 65- and 66-year-olds,who are typically healthier than

the overall Medicare beneficiarypopulation, would leave theMedicare beneficiary populationcostlier, on average, to cover.

People under age 65 who buycoverage through the new healthinsurance exchanges would facehigher premiums to help coverthe cost of insuring the many 65-and 66-year-olds who wouldenter the exchanges; the 65- and66-year-olds would be lesshealthy, and more costly to cover,

on average, than other peoplewho bought coverage through theexchanges.

Under the health reform law (theAffordable Care Act, or ACA), seniors nolonger eligible for Medicare could obtaincoverage through Medicaid or theexchanges. But raising the age ofeligibility for Medicare wouldsubstantially boost out-of-pocket costs for65- and 66-year-olds, which many of themwith modest incomes could have difficulty

affording, prompting some to becomeuninsured and others to forgo needed care.It also would raise health care costsoverall. Policymakers could take somesteps, outlined below, to limitbut noteliminatethese harmful impacts.Moreover, if Congress repealed healthreform, as the House has voted to do, largenumbers of 65- and 66-year-olds who lostMedicare coverage would likely wind upuninsured.

Change Would Produce Net Federal

Savings

The Congressional Budget Office (CBO)has examined an option that would raiseMedicare's eligibility age by two monthsevery year starting with people born in1949 (who will turn 65 in 2014) until itreaches 67 for people born in 1960 (whowill turn 67 in 2027), remaining at 67thereafter.[1] Under this option, CBO

assumes that Congress would make 65-and 66-year-olds with incomes below 138percent of the poverty level eligible forMedicaid, to match the new Medicaidincome limit for other adults that theAffordable Care Act establishes starting in2014.

CBO estimates that this option wouldreduce federal spending by $125 billionover the ten-year period from 2012through 2021. Medicare spending woulddrop by $162 billion, while other federal

spendingprimarily Medicaid andsubsidies to purchase health insurance inthe new health insurance exchangeswould increase by a net of $38 billion. By2035, according to CBO, this option wouldreduce projected Medicare spending byabout 7 percent, from 5.9 percent to 5.5percent of gross domestic product. (Note:The option that CBO examined does notinclude the costs of several steps thatshould be taken to reduce some of theproposal's adverse impacts; these steps,which are outlined below and should be

regarded as essential aspects of theproposal if policymakers decide to pursueit, would reduce the federal savings.)

Cost Increases for Individuals,

Employers, and States Would Far

Exceed Federal Savings

Raising the age of eligibility for Medicarewould have ramifications far beyond thefederal budget. People who lost Medicarewould have to seek health coverage fromother sources. This would affect not only

their own personal budgets but alsoemployers' costs, state budgets, and thepremiums paid by Medicare beneficiariesand participants in the new healthinsurance exchanges.

A recent Kaiser Family Foundation studyanalyzed the key effects of raisingMedicare's eligibility age to 67.[2]Unlike the CBO cost estimate, whichassumes gradual implementation, theKaiser analysis illustrates the effects of theproposal when it is completely phased inby assuming that the proposal is fullyimplemented in 2014.

Kaiser estimates that raising the eligibilityage would save the federal government$5.7 billion in 2014. The savings reflect$24 billion in lower Medicare spending netof beneficiaries' premiums, largely offsetby $18 billion in higher spending forMedicaid and subsidies for low-income

participants in the health insuranceexchanges. The estimated increase incosts to seniors, employers, states, andothers, however, would total $11.4 billiontwice the net savings to the federalgovernment. (See figure.)

Many Who Lost Medicare Coverage

Would End Up Uninsured

The Kaiser study assumes for the sake ofsimplicity that everyone who would loseMedicare coverage would obtain health

insurance coverage elsewhere. Under thisassumption, Kaiser estimates that 42percent of 65- and 66-year-olds wouldobtain coverage from employer-sponsoredplans (either as retirees or active workers),38 percent would enroll in the new healthinsurance exchanges, and 20 percentwould become covered under Medicaid.

In reality, however, many of these 65- and66-year-olds are likely to end upuninsured. Some of those eligible forpremium credits in the exchanges would

not enroll because they would regard therequired premium contribution as too highpeople with incomes between 300 and 400percent of the poverty level (about$34,500 to $46,000 for an individual in2014) will have to pay 9.5 percent of theirincome$3,300 to $4,400forexchange coverage. Even some of thoseeligible for more generous premiumcredits or for Medicaid would likely fail toobtain coverage; participation in means-tested programs like Medicaid falls farshort of that in social insurance programs
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like Medicare, in part because of thedifficulties navigating the applicationprocess.

In addition, many 65- and 66-year-oldswho would be ineligible for Medicaid orpremium credits because their incomesexceeded $46,000 would findunsubsidized coverage in the exchange tobe out of reach. According to Kaiser, halfof 65- and 66-year-olds who would haveto rely on the exchange would haveincomes too high for premium credits.Because exchange plans could charge theoldest workers three times as much as theyoungest, unsubsidized premiums couldreach $10,000 to $12,000 (in 2014 terms)for 65- and 66-year-old individuals andtwice that for couples.[3]

Out-of-Pocket Costs Would Rise for 65-

and 66-Year-Olds

Two-thirds of 65- and 66-year-olds3.3million peoplewould incur an averageof $2,200 more in out-of-pocket healthspending for premiums and cost-sharing ifMedicare's eligibility age were raised,according to Kaiser. The remaining one-third1.6 million people with incomesbelow 300 percent of the poverty level,who would be eligible for Medicaid (ifeveryone up to 138 percent of poverty wascovered) or larger premium subsidieswould pay $2,300 less, on average.Overall, 65- and 66-year-olds would pay

an average of $700 a year more, or $3.7billion more in total in 2014.

In some states, 65- and 66-year-olds couldreceive less adequate coverage inMedicaid and the exchanges than theywould have from Medicare. WhileMedicaid generally offers a morecomprehensive benefits package thanprivate insurance and Medicare, with onlynominal cost-sharing, state Medicaidprograms can limit both the number ofprescriptions covered per month and the

number of physician visits covered eachyear.

For some individuals made newly eligiblefor Medicaid by the health reform lawagroup that would encompass many 65- and66-year-olds under this proposalstatescan opt to provide a much less generousbenefit package than the regular Medicaidpackage, so long as they provide the"essential benefits" available through theexchanges. The Department of Health andHuman Services has yet to specify the

essential benefits package; depending onthe flexibility it gives states in this area,65- and 66-year-olds may lose coverage ofsome benefits or have them covered to alesser degree than they would underMedicare. Finally, because of Medicaid'slow reimbursement rates to health careproviders, some Medicaid beneficiaries arelikely to have more difficulty obtainingphysician services, particularly fromspecialists, than they would have underMedicare.

Costs Would Shift to States, Employers,

and People in Medicare and the

Exchanges

As well as increasing out-of-pocket healthcosts for 65- and 66-year-olds, raisingMedicare's eligibility age would shift coststo states, employers, Medicarebeneficiaries, and participants in the healthinsurance exchanges.

State spending would increase by$0.7 billion in 2014, Kaiserestimates, because Medicaidwould cover all health careexpenses for 65- and 66-year-oldswho would otherwise have beenfully eligible for both Medicaidand Medicare and for whomMedicare would have been theprimary payer. State spendingwould increase by significantlylarger amounts in later years as

states gradually assume a portionof the costs of 65- and 66-year-olds who would not become fullyeligible for Medicaid until healthreform's Medicaid expansion is ineffect. The federal governmentwill pay the entire cost of theseindividuals in 2014, but statesmust pay 10 percent of their costsby 2020.

States would have to pay an evenlarger share of the cost ofcovering 65- and 66-year-olds

newly eligible for Medicaidsomething like 40 percent ormoreunder a proposal for a"blended" Medicaid matchingrate. The proposal, floated invague terms by theAdministration this spring butnever formally issued, wouldreplace the various matching ratesat which the federal governmentreimburses states for theirMedicaid costs with a single"blended" rate for each state.[4]

A state's blended rate would beset at a level that provides thestate with less federal fundingoverall than under current law.Because states would have to paya much greater share of the costof insuring individuals who arenewly eligible for Medicaid as aresult of the health reform law,states would have much lessincentive to assure that eligiblepeople enroll. As a result, thenumber of 65- and 66-year-oldswho became uninsured would behigher.

Employers' costs would increaseby an estimated $4.5 billion in2014 as more 65- and 66-year-oldretired workers whose employersoffered coverage to their retireesreceived primary coveragethrough their employer ratherthan Medicare.

Medicare beneficiaries would paya total of $1.8 billion in higherpremiums because relativelyhealthy 65- and 66-year-oldbeneficiaries would be removedfrom Medicare's insurance riskpool. At present, these youngerMedicare beneficiaries cost lessthan older beneficiaries but paythe same premiums, therebyholding down premiums foreveryone else. The Kaiser studyestimates that premiums for other

Medicare beneficiaries would riseby about 3 percent if 65- and 66-year-olds could no longerparticipate in the program.

Adding 65- and 66-year-olds tothe health insurance exchangeswould raise premiums foreveryone else in the exchanges byabout 3 percent, or $700 millionin 2014. The reason is that underthe ACA, insurers may not chargethe oldest enrollees more thanthree times as much as the

youngest, but the average cost ofcovering the oldest enrollees isover five times that of theyoungest, so insurers would raisepremiums for enrollees under age65 to cover the difference. Aspremiums for everyone in theexchange rose because of theinflux of 65- and 66-year olds,some of the healthiestunsubsidized participants likelywould drop coverage, further
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pushing up premiums foreveryone else.

According to Kaiser's estimates, theadditional costs to 65- and 66-year-olds,state governments, employers, Medicarebeneficiaries, and exchange participantswould total $11.4 billiontwice the netsavings to the federal budget. Thus, likethe House Republican budget fashioned byRep. Paul Ryan, raising the age ofeligibility for Medicare would increasenot reduceeconomy-wide health carespending.[5]

Finally, by shrinking Medicare's share ofthe health insurance market, the proposalwould reduce Medicare's market powerand weaken its ability to serve as a leaderin controlling health care costs.

Modifications to Proposal Could

AmeliorateBut Not SolveIts Core

Problems

Most of the problems discussed abovewould occur under any proposal to raiseMedicare's eligibility age to 67. Totalhealth care costs would rise, some seniorswould end up uninsured, and many wouldface unaffordable out-of-pocket costs.Should the Joint Committee neverthelesschoose to recommend this proposal, itshould include certain modifications thatwould limitbut not eliminatetheadverse effects on many beneficiaries and

on the states:

Raise the age cutoff for health

reform's Medicaid expansion to

67. Under the Affordable CareAct, the Medicaid expansion forpeople with incomes below 138percent of poverty extends onlyto age 65. If Congress fails toraise that age limit to 67, some65- and 66-year-olds withincomes below 100 percent ofpoverty who lost Medicare

eligibility would be eligible forneither Medicaid nor premiumcredits. Both the CBO andKaiser analyses assume thatpolicymakers would make thisessential change as part of raisingthe Medicare eligibility age.

Require states to provide the

regular comprehensive Medicaid

benefits package to 65- and 66-

year-olds. This would ensure thatstates provide benefits that are atleast as comprehensive as underMedicare to 65- and 66-year-oldswith incomes below 138 percentof the poverty line. However, itwould not address gaps inMedicaid coverage that existtoday. Nor would it deal with theproblems that some Medicaidbeneficiaries have with access tohealth care providers. It alsowould not address potentialdifferences in benefits betweenthose available under Medicareand those that will be availablethrough the exchanges.

Hold states harmless for all of the

additional cost of covering 65-

and 66-year-olds through

Medicaid. As noted, stateswould see higher Medicaid costsfor 65- and 66-year-olds under

this proposal. States shouldpermanently receive a 100-percent federal match for thispopulation to ensure that thefederal government does not shifta large share of the costs to thestates. If Congress adopts theproposal for a blended Medicaidmatching rate, it should eitherexclude 65- and 66-year-oldsfrom the blended rate and providea full 100-percent match orincrease the blended rate to take

into account the phase-in of thehigher eligibility age.[6]

Make all 65-and 66-year-olds

who qualify for premium credits

eligible for cost-sharing subsidies

as well . Under the ACA, cost-sharing subsidies are availableonly to individuals with incomesbelow 250 percent of the povertyline, and the subsidies for thosebetween 200 and 250 percent ofpoverty are very modest. Peopleaged 65 or 66 require more health

care, on average, and hence incurgreater cost-sharing expensesthan younger people. Some 65-and 66-year-oldsespeciallythose who are in poor healthcould face significantly highercost-sharing charges in theexchange than under Medicare.Therefore, if Congress raises theMedicare eligibility age, it should

increase the cost-sharingsubsidies for 65- and 66-year-oldsbetween 200 and 250 percent ofpoverty and extend the subsidiesto income levels somewhat above250 percent of poverty, which isnow only $27,225 for anindividual living alone.

End Notes:

[1]Congressional Budget Office,Reducing the Deficit: Spending and

Revenue Options, March 2011, pp. 45-6.

[2]Tricia Neuman, Juliette Cubanski, andothers,Raising the Age of Medicare

Eligibility: A Fresh Look Following the

Implementation of Health Reform, KaiserFamily Foundation, July 2011,http://www.kff.org/medicare/8169.cfm.

[3]Kaiser Family Foundation,Health

Reform Subsidy Calculator,http://healthreform.kff.org/subsidycalculator.aspx.

[4]Edwin Park and Judith Solomon,Proposal to Establish Federal Medicaid

"Blended Rate" Would Shift Significant

Costs to States, Center on Budget andPolicy Priorities, June 24, 2011,http://www.cbpp.org/files/6-24-11health.pdf.

[5]Paul N. Van de Water, "Ryan Budget

Would Increase Health Care Spending forMedicare Beneficiaries,"Off the Chartsblog, April 8, 2011,http://www.offthechartsblog.org/ryan-budget-would-increase-health-care-spending-for-medicare-beneficiaries/.

[6]For an analysis of the problems withthe blended rate proposal, see Park andSolomon,http://www.cbpp.org/files/6-24-11health.pdf.
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Conversion Then and Now

Throwing swords into plowshares

requires a plan.David CasagrandeSeptember 1, 1992

http://prospect.org/cs/articles?article=conversion_then_and_now

WORKS DISCUSSED IN THIS ESSAY

John A. Alic, Lewis Branscomb,

Harvey Brooks, Ashton B. Carter,and Gerald L. Epstein,BeyondSpinoff: Military and Commercial

Technologies in a Changing

World(Harvard Business SchoolPress, 1992).

Maryellen R. Kelley and Todd A.Watkins, The Defense-IndustrialNetwork, Carnegie-MellonUniversity, 1992. (Forthcomingas a report for the Office ofTechnology Assessment.)

Ann Markusen and Joel Yudken,Dismantling the Cold War

Economy (Basic Books, 1992).

Ann Markusen, Peter Hall, ScottCampbell, and Sabina Deitrick,The Rise of the Gunbelt: The

Military Remapping of America(Oxford University Press, 1991).

Seymour Melman, Our DepletedSociety (Holt, Reinhart andWinston, 1965).

Seymour Melman, PentagonCapitalism: The Political

Economy of War (McGraw-Hill,1970).

Seymour Melman, ThePermanent War Economy:

American Capitalism in Decline (Simon and Schuster, 1974).

Nine trillion dollars later the Cold War isover, and the prospect of convertingindustries to peacetime objectives seems at

once inevitable, improbable, and repletewith momentous opportunities. We havebeen here before, of course. America wentthrough a very deliberate conversionprocess beginning in 1939, which gaveway to full mobilization in 1942, and asomewhat hectic though still plannedreconversion in 1945-46. What isastonishing about the current transition isthe general obliviousness to how heavilythe Cold War economy has used militaryspending as both a spur and a crutch. Noris there any organized effort to maximize

the conversion opportunity, much less tominimize the pain.

In part, the absence of a coherentconversion plan reflects widedisagreement about the effect of militaryspending on the economy. To the extentthat mainstream political and economicopinion has focused on this question at all,observers have divided into two camps. Ingeneral, those politically hostile to theCold War found economic reasons todislike it as well, while those whosupported its strategic purposesemphasized the positive spinoffs ofmilitary technology. Planning for aneconomy less reliant on military outlayrequires an accurate assessment of how theCold War interacted with non-militaryeconomic life.

For the critics, the military economy ismostly a parasite on civilian needs,diverting resources, creating, in MaryKaldors phrase, a baroque arsenal, thatchannels scientific resources, technologies,

and corporate cultures onto narrow pathsdictated by the parochial needs of thePentagon. Ann Markusen works broadly in

this tradition, both in her new book withJoel Yudken,Dismantling the Cold War

Economy, and in her earlier The Rise of theGunbelt, written with three colleagues. Afar more complex and qualified critique isoffered inBeyond Spinoff, which holdsthat defense spending has been a positivestimulus to the American economy, atleast some of the time, notably by leadingand diffusing technological advance. Theauthors include four scholars fromHarvards Kennedy School ofGovernment, Lewis Branscomb, former

chief scientist of IBM; Harvey Brooks,former Harvard Dean of Engineering;Ashton Carter, director of HarvardsCenter for Science and InternationalAffairs, and Gerald L. Epstein, director ofHarvards research project on dual-usetechnologies. They are joined by JohnAlic, a senior associate at the Office ofTechnology Assessment.

Where the two works emphatically agreeis their common conclusion that, with theCold War over and military outlaysdeclining, the nation needs a civiliantechnology policy to replace what waseither partly beneficial (Alic et al.) ormostly malign (Markusen et al.), butwhich is, in any case, rapidly dwindling.

This debate is as old and complex as theCold War itself, and the literature onconversion is vast. Seymour Melman,perhaps the most prolific writer on thesubject, is widely known for hisdepletion thesis first put forth during the1960s. He has argued consistently that
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defense spending fails to generateeconomic growth, diverts intellectual,financial, and material resources awayfrom civilian industries, militarizessociety, retards research and development,and preempts a significant share of thenations capital stock. In Our DepletedSociety, he maintained that a depletionprocess in American industrial lifefollowed from the diversion of capital andtechnology to the military in the 1960s. InPentagon Capitalism, Melman describedthe subsequent formation of a Pentagon-based management over the militaryeconomy, which made the DefenseDepartment a de facto planning ministrywith enormous power over a substantialportion of Americas resources, as well asexploitive power over American societyand foreign countries. Finally, in ThePermanent War Economy, he outlined theworkings of a new economy generated bythe military system, which resembles a

type of state capitalism. This newregime, he argued, contributed to a loss ofindividual liberty and the erosion ofindustrial productivity.

Though the Cold War did lead to asubstantial militarization of Americantechnical and scientific capital, it hadpositive effects as well. As it turns out, thesapping effect of defense spending onthe civilian economy is not quite asenfeebling as Melman (and others whowrite in this tradition such as Lloyd

Dumas, John E. Ullman, Mary Kaldor, andPaul Kennedy) would frame it. EvenMelman concedes that, as a matter ofmacroeconomics, Pentagon spendingplayed an unintended Keynesian role.

Markusen and her colleagues extend thedepletionist thesis in a more subtle andappropriately complex fashion. In

Dismantling the Cold War Economy, Markusen, a professor of urban planningand policy development and director of theProject on Regional and Industrial

Economics at Rutgers, along with JoelYudken, also at Rutgers, emphasize thesectoral and regional effects of Pentagonprocurement. The two argue that themilitary needs of the Cold War fostered anew industrial sector comprised ofaerospace, communications, andelectronics industries, ACE for short.While this seems a positive contributionby the Pentagon, the authors contend thatthese key industries grew behind a wallof separation, dictated by the peculiarneeds of the military and largely isolated

from civilian markets. As wholecommunities and industries becamedependent upon the Department ofDefense for their survival, a quietindustrial policy aimed narrowly at thenewly emerging ACE industries evolved.Meanwhile, in the absence of a counterpartcivilian industrial or technology policy,traditionally strong American industriessuch as steel, automobiles, and machinerywere left to languish, while thecomparative advantage of the UnitedStates is increasingly confined to weaponssystems and their high tech spinoffs.

In The Rise of the Gunbelt, Markusen andher colleagues describe how the military-industrial complex redrew the economicmap of the United States. During the ColdWar, defense spending and its oscillationsbecame a major determinant of regionaleconomic prosperity or decay. The West,South, and East coast reaped enormous

gains from the distribution of Pentagonmoney, while much of the Midwestbecame a commercial rustbelt. Pentagonprocurement policies raised income andproductivity within regions but alsoincreased the disparity between them. Twoprime examples are California andMassachusetts, once the darlings ofmilitary technology, now in economicfree-fall. As Michael Dukakis discoveredwhen the Massachusetts miracle fell apartduring his 1988 campaign, what thePentagon in the early 1980s gave, defense

cuts could take away. Markusen warns thatthe diminished role of defense spendingwill deprive the ACE industries of alongstanding engine, and leave themvulnerable to the caprices of marketforces, or to companies supported byforeign governments.

A centerpiece of Markusens argument isher analysis of postmodern, militarytechnologies--missiles, electronic warfareand satellites--which produce fewcommercial spillovers because the

Pentagons agenda tends to narrow thearray of available technology.

Not entirely true, say the collective authorsofBeyond Spinoff. They have written atruly groundbreaking book that calls intoquestion Markusens and Yudkensconclusions about the narrowing effect ofmilitary spending on the creation anddiffusion of technology in the Americanpolitical economy. Where the Rutgersauthors emphasize a wall of separation, theHarvard group argues that most advanced

technology is not only dual use, butmultiuse. Microchips are used in missileguiding systems, childrens toys,automobiles, and in the machines thatmanufacture the chips themselves.Furthermore, much of what we callinnovation is a continuous process ofincorporating small refinements over manyyears.

As the Harvard authors point out,Companies compete on the basis ofexisting products, not those yet to becreated. For these products, companiesengage in a very different process ofinnovation in which they seek constant,incremental improvements. It is uponthese very rapid incrementalimprovements that competitivenessdepends, not the once-in-a-whilerevolutionary developments in hightechnologies and science.

According to Alic, Branscomb, andcolleagues, the Pentagon has been morenurturing of generic technology than someof its critics contend. The Defensetechnology establishment has been shrewdenough to appreciate that its own narrowinterests in military technologies oftendepended on broader technical advances,of which the microprocessor is a signalexample. Often pursuing broadtechnologies with no immediate militaryrelevance, the Pentagon typicallyfinanced rapid movement down the

learning curve until commercial marketstook over. Far from being serendipitousspin-off, the Pentagons strategy ofsponsoring more generic R&D was oftendeliberate, though accidential spin-offssometimes occurred, too. According to theauthors, Very few technologiesproceeded effortlessly from defenseconception to commercial application.Rather, this transfer of technology fromdefense to civilian applications reflected acomplex Pentagon-led technology policy,quite at odds with Americas general

pretensions to laissez-faire.

In short, the technological relationshipbetween defense and commerce was muchricher and more complex than the spin-offmodel implies. Many of our mostdynamic postwar industries, such assemiconductors, computers, jet aircraft,and communication satellites would havedeveloped commercial applications muchmore slowly without the involvement ofthe Department of Defense. Indeed,defense spending was not just helpful to


14/37

these sectors, but thoroughly dominatedthem during their formative years throughthe sheer volume of Pentagon spending.Notwithstanding the Pentagons oftenparochial interests and its concern to bottleup some very sensitive technologies suchas missile propulsion, encryption, andnuclear weaponry, technologicalinnovation has a way of spreading.

Beyond its R&D role, the Pentagon hasalso been an important source of technicaldiffusion, particularly in the application ofadvanced manufacturing techniques. Hereagain, the Cold War has substituted for acivilian policy of what some have termedindustrial extension. This diffusionary roleplayed by the Pentagon has beenemphasized in a recent report, TheDefense-Industrial Network, prepared forthe congressional Office of TechnologyAssessment. The authors, Maryellen R.Kelly and Todd A. Watkins, argue that the

bulk of Pentagon procurement goes todual use firms that, unlike purelycivilian American firms, are collaborativein their relationship with customers,technology vendors, subcontractors, andcompeting plants. This network wascreated by Pentagon technology policiesmandating the sharing of expertise andinformation. The result is a highly-integrated, often efficient network ofdefense industries--our only equivalent toJapans keiretsu system. In that system,large companies support enormous

networks of suppliers, to which theydiffuse advanced manufacturingtechniques and quality controls; they alsoprovide long-term markets, which allowssmall subcontractors to invest in advancedcapital equipment. Although somecommercially-oriented American firms,such as auto makers, do have suppliernetworks, they provide neither thediffusion nor the permanent partnership ofthe keiretsu system.

According to the OTA report, however,

the industries constituting the defensesupply network include some of the mostadvanced and vital sectors of our economywith respect to capacity and efficiency.This is particularly true of the plantsproducing manufacturing technology andequipment, such as the incorporation ofcomputer-aided design into advancedindustrial machinery. To waste thisdeveloped capacity during the process ofconversion would be devastating.

On balance, the depletionists have a strongcase that the Cold War put regional gun-belt economies at the mercy of defensespending, and that a defense industrialpolicy developed at the expense of acivilian one. But they have overstated theassociation between the military-industrialcomplex and economic decline. The pre-emption of resources by the Department ofDefense, though a contributory factor, wasonly a part of the problem. Moreover, inits day, a Pentagon-led technology policywas probably the best we could havemanaged. It is doubtful that the Americanpolitical culture would have tolerated acivilian industrial policy during the ColdWar. Perhaps it was only possible to havean industrial policy which was cloaked byurgent concerns of national security.Further, some of the skewing of resourceshad less to do with the size of the defenseeconomy than with other effects ofAmericas hegemonic role. For example,

the federal government has placed controlson the export of technologies thought vitalto national security. These export controlshave prevented American industries fromcapitalizing on defense-producedtechnologies in global commercialmarkets, while our competitorsemphasized commercial sales andburdened their producers with fewercontrols.

The several critics agree, however, that anew era requires new technology policies.

The authors ofBeyond Spinoffagree thatthe Pentagons dominant role in high-techR&D has had constraining, as well asfacilitating, effects. The former includearcane contracting requirements, a cost-plus approach to procurement, securityrestrictions on technical data, and somerelationships with producers of esotericproducts that are virtually wards of themilitary. However, rather than proposingto scrap the Pentagon role entirely, theHarvard authors offer a variety ofrecommendations to take advantage of the

dual-use potential of militaryprocurement and R&D support, to lowerthe wall cited by Markusen.

Their title,Beyond Spinoff, is intended asboth a call for a more sophisticatedunderstanding of how the Pentagon hasinfluenced technology, as well as a pleafor us to recognize that, howeverbeneficial Pentagon patronage oftechnology may have been in the past, it isno longer sufficient. During the post-waryears we could afford to overlook the

inadequacies of an indirect technologypolicy since international competitionposed little economic threat. The new erais characterized by two key differences:increased global competition and adiminished presence of the Pentagon as acovert source of industrial policy.

Both sets of authors call for a new nationaltechnology policy. Where the Harvardgroup still sees a major role for dual-use,Pentagon-led R&D, Markusen andcolleagues want the whole shooting matchto be civilianized. They call for a set ofregional economic development policiesnot dependent on the Pentagon at all, aswell as a comprehensive conversion policyfor both industries and workers.

THE OTHER CONVERSION

How may our own past inform conversionplanning now? As America prepared for

World War II, officials carefully studiedthe recent history of their own era, andwere determined not to repeat the mistakesof World War I. We can similarly profit byexamining the conversion andreconversion experience of World War II.The debate surrounding the conversion toa wartime economy began in 1939, whenthe architects of war mobilization werebusy designing and building what wouldbecome known around the world as theArsenal of Democracy. The public,industrial leaders, and politicians

understood that this mobilization would bereversed at wars end.

The Second World War marked Americasintroduction to large-scale nationaleconomic planning, and the militaryspotent influence on investment intechnology and innovation. At wars end,the American public and its politiciansbelieved that the future prosperity ofAmerica depended upon a smoothtransition to peace, and that reconversionwas an opportunity to change the direction

of the nation. Though our future is asforeboding at the end of the Cold War, nosuch agreement exists in the 1990s.

The robust macroeconomic performanceof the U.S. economy during the post-World War II reconversion wasunprecedented. The conclusion of pastwars had brought economic dislocation--inflation, unemployment, or both. But in1945-46, high employment prevailed andonly a short rise in the general price leveloccurred, thanks to newfound purchasing


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power and the increased productivecapacity of American industry--bothlegacies of the mobilization.

This happy result reflected both fortuitouscircumstances and deliberate planning.War bonds provided the savings forconsumers to indulge their pent-updemand for consumer goods. The GI Billfunctioned both as an income-support anda retraining policy. The release of controlson the production of consumer goods,particularly consumer durables, allowedsupply to meet demand withoutunacceptable inflation. This enormouspent-up demand for badly neededrefrigerators, cars, and washing machinesfueled the reconversion of production toformer peacetime production schedules.Investment in war production hadrecapitalized American industry, and led toa profusion of new technologies. Finally,the government did have a policy, albeit a

truncated one, to lubricate the transitionfrom military to commerical production.

By contrast, no such backlog of demandexists in 1992. Nor has the Americanindustrial plant been recapitalized; on thecontrary, its capital is substantiallydepleted. There is no counterpart to the GIBill as a retraining or income-supportpolicy. Indeed, the unemployment level ishigh, wages are low, and Americans arenot in the mood to spend money.

The governments reconversion role at theend of World War II was cut short byRoosevelts death and the headlong rush todecontrol that followed. But there was farmore conversion planning than there istoday, in part because there was a muchgreater acceptance of economic planningduring the war. The federal governmenthad mapped out the countrys industrialtransition long before the ending ofhostilities. To start with, the governmentnegotiated the cancellation of over300,000 contracts, which involved a

potentially devastating financialcommitment of $63.5 billion. The Officeof Contract Settlement, legislated intoexistence in 1944, began its work early; by1945, it had settled of five out of six ofthese contracts through advance paymentsand loans, an appeals boards, andextensive training programs.

Furthermore, the Surplus Property Act of1944 authorized the sale of government-built warplants to private business. Thesefacilities were often sold to firms at 20%of their market value. They amounted towell over one-half of the value of allmanufacturing plants in existence in 1940.

Despite the continuation of abnormallylarge profits accruing to business after thewar, the Revenue Act of 1945 called for animmediate repeal of the excess profits tax.This law also repealed the capital stock taxand lowered corporate taxes, placing thebusiness community in a strong postwarfinancial position. A Tax Adjustment Act,passed in July of 1945, raised exemptionsand sped up refunds and credits, againensuring the postwar financial strength ofAmerican business.

Despite its broad success, the reconversionprocess was far from perfectly smooth at

the local level. After V-J Day, theovernight cancellation of some $24 billionin war contracts triggered strikes, massivelayoffs, and job-downgrading throughoutindustry. Unemployment reached almosttwo million by October 1,1945, andisolated pools of unemployed workersdotted the country.

The Brewster Aeronautical Corporation,for example, was given only a momentsnotice that its contract for Navy fighterplanes was terminated. The corporations

9,000 workers staged a stay-in strike,demanding permission from thegovernment to begin the manufacture ofhousehold appliances. In the end,Brewsters Long Island City plant wasclosed, its tools equipment and parts wereauctioned off, and its workers took to thestreets.

Still, the problems during the reconversionof 1945-46 remained largely local andcontained; without the federalgovernments guidance, they might have

exploded into a national trend. And by1948, as the Cold War dawned, a moreprotracted form of military stimulusreshaped our political economy. Whatremained of the arsenal of democracy wasslowly transformed into a semi-perpetualCold War machine which provided enoughtechnology and growth for our economy torule world markets.

Today, the lack of an identifiable enemy,coupled with the rise of foreigncompetition, increases the urgency of acoherent conversion policy. The Cold Wareconomy has become a way of life formany industries having no memory ofcompeting in the market. To date, onlypiecemeal attempts at conversion policyhave been made. The funding set aside inthe Defense Authorization Act of 1992 forretraining, community adjustment, anddual-use technology is but a small leverfacing a mountain of structural problems.Without a clear policy from the federaland state governments, contractors willcontinue to diversify, lobby for cutbackrestraint, lay off workers, and wait foranother war.

A high-profile agency outside the cabinetand directly responsible to the presidentmay be the solution. Such agencies weresuccessful during the World War II

because they could operate freely, andwere regulated mainly by public opinion.Markusen has argued for a TemporaryOffice of Economic Conversion thatwould develop conversion programs, workto get cooperation from local and stategovernments, and generate data onconversion, and endeavor to reconstitutethe networks of diffusion. It could adviseon the size and composition of futurebudget cuts and coordinate thedepartments of Labor, Commerce, andDefense. It would also have an advisory

board made up of representatives fromdefense, labor, unions, professionalscience and engineering associations, andstate and local development offices. Itwould remain small, achieving its goalsthrough technical and financial assistance.

After more than four decades of relianceon the Cold War as the organizingprinciple for the American economy, weneed a different path. Only a concertedeffort at conversion, easing the adjustmentof communities, conserving the

manufacturing capabilities of the defenseindustries, and launching a technologypolicy aimed at diffusion, will suffice.
http://prospect.org/


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The Psychology Of America's Debt Problem:

Denial, Anger, Bargaining, Depression, Then

AcceptanceCharles Hugh Smith, Of Two Minds

Jan. 25, 2011, 11:12 AM

Today we offer a guest essay by correspondent Eric A. which applies the Kubler-Ross model to America'scurrent state of denial and wishful thinkingReading Charles Hugh Smiths Cry in

the Wilderness for Individual

Solutions (As Public Policy Fixes AreImpossible, Focus on Individual Solutions)to our present crisis, Im struck by theKubler-Ross model. You know the one:

1.Denial2.Anger3.Bargaining4.Depression

5.Acceptance

She doesnt say how long each stage takes,but in a body the size of a nation, it musttake a very long time indeed.

Is there anybody out there who doesntknow the financial system is broken? Thathome prices need to fall at least 30%--ifnot 50%--more? That Social Security isalready in deficit? That they wont beretiring in the manner in which theyvedesired?

And the solutions, Oh, the solutions!

1.More borrowing2.More lending3.More spending4.More lying, cheating, and stealing5.More government orders6.More expansion

More of everything weve done that got ushere. Is there anyone who doesnt know

you cant solve a debt-and-spendingproblem with debt-and-spending?

So why is it still going on?

This is the wonder of Denial, of lying toourselves, or in the American parlance, ofBullshit.Bullshit is different from lying inthat it isnt technicallyuntrue, but itseffectively untrue. Second requirement isthat its invariably selling something,getting you to do something for thebullshitterpower or money. Third is that

everyone knows that its bullshit. Theyknow its a lie, but theyre willing to becomplicit in the lie anyway, for their ownreasons. Like all Cons, Bullshit can neverwork without the complicit help of the so-called victim.

The only reason all these things can stillgo on is Denial.

Why?

I was at a Tea Party meeting (I know, Ivealready admitted it) where one of theparticipants asked, Are you willing togive up Social Security?

What? I asked stupidly.

If you cut these taxes and reducegovernment, itll end Social Security. Iwant to know who here is willing to havetheir own check cut.
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I stared, staggered at the obviousness ofthis simple statement.

Sir, I stuttered, Its already gone.There IS no Social Security. Youd belucky to get checks for even two moreyears.

My words did not compute so I let it slide,turning to other subjects.

The unsustainable nature of the numberssurrounding Social Security and Medicaidhave been obvious since the Baby Boomgeneration was done being born in 1966.The scam was fully apparent by at least the(non)re-structuring of withholdings withthe Greenspan-Boskin Commission in1983and at least by 1984, as even theincreased revenues were spent, withnothing saved.

It would be self-evident that it wouldnt

matter in any case, since an entire nationcannot buy special pixie dust through itswhole life without driving the price upnot Stocks, not Bonds, not even goldandthen sell it through their whole retirementwithout driving the price of that asset backdown to zero again. That is, you cant allput $10 into a hat, and have everyone pull$20 back out. Thats what Social Security,401k privatization, the Stock Market,Investors, all propose to do.

Since 1983, there have been commissions

every few years, headlines in every majornewspaper, including most recently G.W.Bushs front-page quote,

There Is No Trust Fund.

I mean, exactly what kind of warning wereyou looking for? Do they have to come toyour house and shake you by the ankles?

Moving into the new decade, we findourselves with a $1,600,000 Milliondeficit --per year--and the now-common

knowledge that Social Security doesntexistits just a budget item that is paidlike any other: through borrowing.Borrowing on top of that $1.6 Trillion. PerYear.

And you STILL think that you havesomething to lose? That theres theslightest chance Social Security will bepaid?

And Im not following the arcana of theway governments reliably o ver-promise

and default in history from Weimar toFrance, the close examples of Russia in1997 and Argentina in 2001, that in 1776Adam Smith had already declared No

government ever pays off their debts, orany of the other second-level study that iseasily found.

Now thats denial.

Denial kills.

So whats my point with this?

Would you rather, as with NJ GovernorChristie, be told that there is no money inthe known universe to pay what is owed inpensions, on bonds, in stocks, or in realgoods, and thereby be able to adjust yourlife accordingly? Or would you rather, likeGM Union workers and Enron employees,wake up one day and find that you have nopension whatsoever, but since you didnt

expect it, lose both house and pension at70 because hadnt saved on your owneither?

Heres some help: one way youll have aretirement, however modest, and the otherway youll be eating dog food under abridge in East L.A. Thats what lying does.Lying to others or yourself. Thats whythere is a thing called morality, andthats why its wrong.

But this is the bullshit we still tell

ourselves, 5, 10, 30 years after the truth isobvious, and this the bullshit theyllcontinue to sell youwith your ownstolen moneyuntil you stop buying it.

Which leads me to Part Two.

What comes after Denial?

Thats right, Anger, and this country willrip itself apart with recriminations andblame. Blame the Left, Blame the Right;Blame the rich, Blame the poor; blame the

insiders, blame the outsiders; blame thegovernment, blame the anti-government;blame the old people who set it up, blamethe young who wont pay for it. Blame,acrimony, angerand violence. In thesestill-rosy times perhaps you might haveseen what Im talking about.

Whos really to blame? Well, people whobroke the lawespecially that highest law,the Constitutionneed to be tried andpunished, and in keeping with that law,with real charges, real evidence and by a

jury of their peers. Theres plenty of roomfor that. But what does that do? They onlycommitted the crimes we allowed them towith our own sloth and indifference, withthe same immorality weve let spring up inourselves.

Were to blame. And being responsible,now were the ones who are about to takethe inevitable consequences of our ownimmoral and irresponsible actions. Theredont need to be any trials for us: ourpunishment is already certain. But in themidst of that Anger and Blame, historysays there will be wrenching in-fightingbetween groups, violence, and often eveninsurrections and war.

Whats next on historys Kubler-Rossmodel?

Bargaining.

This is what we couldhave done in thefirst place, if we hadnt been so dedicatedto what Basiat called, The Fiction of theState, that august bodythrough whicheverybody endeavors to live at the expenseof everybody else.

How could each of us live at the expenseof everybody else? Who are we going toget it from?

Heres a newsflash: Guess where wealthcomes from?

A: We make it.

It doesn't come from Government. Itdoesn't come from money, or a magicfairy called the economy. All wealthcomes from our own hard work, with eachof us working to our abilities,cooperating, using the resources we have.

So if we do that, how are we going to getricher or poorer than what we ourselvesdo? Get money right out of your head:

money is nothing but recording system forreality, not reality itself. Creating money isuseless. If you want a hammer, you needto make a hammer. Money does not makea hammer: a hammer factory does.Likewise, if you want a retirement, thenyou need to build a real condo, train a realnurse, clear a real field, hatch a realchicken for a real dinner, and dont expectanybody else to do it if you wont. Wecant do anything that we ourselves dontdo. We cant have anything we ourselvesdont make. QED. Adding money makes
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no difference at all. Billions, Trillions,Quadrillions in bailouts--doesnt matter.

So what is Bargaining? Its where peopleare so tired of the uselessness of fightingeach other, ordering each other around,making each other pay for each othersmistakes that we stop wasting our time onthis useless activity. This is the first lessonof slavery, of tyranny, and why they fail:it's actually easier to DO the work than toforce someone else to do it.

We start saying to ourselves: We have Xin resources, and Y in needs. How do weget substance X to person Y in a fair andefficient way? We used to use the oldways but the old ways didnt workanymore. We say, How much are youcontributing to the overall good, theoverall wealth, happiness, and security ofeveryone, and therefore what is fair toreceive out of the overall wealth we

have?

We used to use the monetary system toallocate this, but the monetary system waskidnapped, taken out back, and shot. Wecan make a new onein the worst ofWeimars inflation it took only a weekbut we will still face the choice to eitherhave a fair one, or an unfair one. The fairone people will work with and prosper.The unfair one people will reject and willcollapse into poverty for as long as ittakes. 70 years in the case of the USSR,

1,500 years in the case of Feudalism. Itdoesn't have to end.

The only way the system works, the onlyway wealth is created is one way: throughfree, voluntary cooperation. Fighting onlymakes us poorer every minute we indulgein it.

Guess what also happens withBargaining? We do a real accounting ofour real assets, NOT according to theginned-up, mark-to-fantasy authorized by

the now-irrelevant FASB. We areweighed, measured, and we come upwanting. We discover we are as poor aswe actually are.

Everybody knows this, of course. Wevebeen lying to ourselves for decades. We nolonger have manufacturing, no longer headR&D, are decades behind in energy, nolonger have businesses, no longer place ineducation, in work, we no longer have amiddle class, we don't even make our ownshoes. Were a gutted shell, financially,

economically, morally, socially,intellectually, militarily. Were a 3rdworld nation, on par with Brazil. Why dowe lie to ourselves about this? Why do wewrite pretty numbers in a pretty book thatpretends we have real money we can cashin and spend? Is it so bad to have to doreal work to create real things in the realworld honest men can be proud ofthemselves for? We used to. For 100years, from 1789 to 1914 we did. Andnow?

...The realization that were poor, wewasted it all, and have nothing before usbut hard work leads to Kubler-Ross #4:Depression.

We are already IN an economicDepression, and we have been since 2001.According to no less a source than AlanGreenspan, ALL the prosperity since2001 was nothing more than debt;home-

equity withdrawals that must be repaid.Imean, a 1% growth rate?

All the prosperity was debt, which must berepaid with interest, or else defaulted on inbankruptcy--a bankruptcy that will ruinBOTH the borrower AND the lender.They are a single item on the Asset-Liability ledger book and must live and dieas one. You cannot bail out the lenderwithout the borrower, and vice-versa.There is no solution except either totalslavery or near-total repudiation of debt.

And when we go bankrupt, no one willlend to us anymore; we will have to livewithin our means. But waityouresaying we will a) not have a ruinedeconomy struggling for decades to re-paywhat cannot be paid? Well just be freewith a new un-indebted economyovernight? And that b) that we wont beable to borrow, thus fixing the nationaldebt, budget deficit, and insider payoffs allin one fell stroke? And we get PAID to dothis? Tell me again why we shouldnt go

bankrupt as fast as possible? What arelenders going to do, repossess and occupythe whole country?

History reliably says if you want tosurvive,you should defaul

18th edition - september 6, 2011

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