Politics Foreign Affairs Culture Fellows Program

Don’t Blame Trade For Static Living Standards

The real culprit is the trillions we pay in defense and medical costs each year.

Six trillion dollars for Middle East wars and monopoly medical costs—that’s the real reason for slow growth in our living standards. So much wasted money! Kipling wrote about it years ago in his poem Arithmetic on the Frontier when the expensive British soldiers were fighting Afghans wearing sandals:

With home-bred hordes the hillsides teem,

The troopships bring us one by one,

At vast expense of time and steam,

To slay Afridis where they run.

The “captives of our bow and spear”

Are cheap, alas! as we are dear.

An oft-repeated argument against American trade with China and free markets in general is that living standards for many workers have risen little over these last years, that free markets are “unfair” and don’t bring about proper distribution of benefits. Leftists use this to argue for new taxes and new socialist measures. Of special concern is that many conservatives, particularly the new “national conservatives,” have swallowed these arguments. They too now criticize trade and free markets and are proposing statist government solutions.

All democracies are vulnerable to special interests trying to obtain monopoly profits and prevent competition. The military industrial complex and its sister, the medical-industrial complex, together exert enormous political power to suck out more and more of our national wealth. The numbers have become incredible: over $1 trillion a year for “defense” and nearly 20 percent (over $3.5 trillion) of our gross national product spending for medical costs, more than twice the percentage of many advanced European nations.

Anyone who has dealt with America’s medical system can spot the waste, the unnecessary tests and prescriptions, the often exorbitant prices, and the brutal, bankrupting costs for the uninsured. The system is so complicated that it’s very difficult to reform. Inventors of miracle drugs should be allowed to become rich. Living longer can be as great a benefit as having cheaper goods. But it should be measured as an increase in our standard of living. At least we see the benefit from health care—unlike with bombs, missiles, and subsidizing foreign armies for our endless wars. A GAO study found that we fire 250,000 bullets for every dead insurgent. Also we pay $1 million a year to field every soldier in Afghanistan.

Despite all these costs, America’s economic system creates so much new wealth that living standards have still been rising. Reference the studies showing the unequal distribution of income in America: virtually all of the leftist ones don’t include welfare benefits, like subsidized rents and health care. They are also wrong when they state that the wealthy often pay a lower tax rate than the poor and middle classes. Actually, half of all Americans don’t pay any income tax, so how can they be paying higher rates than “the rich”?

Leftists also rarely take account of how lower costs for consumer goods raise the poor’s standard of living as a percentage of their income. Just go through a Walmart or Costco and see how a nice shirt can be bought for a few dollars or a roasted chicken for five. Washington Post columnist Robert Samuelson explains how rising living standards are not shown in many statistics.

Analysts also don’t take into account the good wages for advanced manufacturing—some $70,000 to $80,000 per year—and that over a million such jobs have gone begging because of the shortage of educated workers, a casualty of many big-city schools’ miserable teaching results. It’s medical costs that are a major impediment for American manufacturers and a reason for our trade deficits. Costs of $20,000 a year per worker make much of our simpler industry uncompetitive internationally. They also contribute to the new appeal of socialism among many Millennials who think of it as meaning “free” government health care.

Addressing the issue of military waste in 2013, I wrote a piece called “16 Ways to Cut Defense Spending.” It’s still high up on Google search. Adding in our endless wars, we have such costs as one officer for every six enlisted men and more four-star generals than at the height of World War II. I also wrote a piece called “Sequestration: The Way to Cut Defense Waste,”  where I warned that under the sequester, the Pentagon would first cut vital needs, which it then did by scaling back pilots’ flying time, just like a corrupt big city machine first cuts the time of policemen on the beat.

Every extra billion dollars for “defense” costs an added extra billion to welfare spending, the price Democrats demand in Congress. The deficit, which is already $1 trillion, will soon rise by another half trillion as the game goes on. It now appears that a financial crash will be the only way to get Congress to address the spending cataclysm. Incidentally it must soon vote to (again) violate the Budget Control Act or $300 billion in Pentagon cuts will take effect in January.

Think what the government could have done with the $6 trillion wasted on Middle East wars. We could have had high-speed rail in the Northeast and Midwest; we could have rebuilt much of our crumbling infrastructure; we could have subsidized health care for millions; or we could have not borrowed the money at all and kept our national debt more manageable.

Economists don’t count what they can’t measure. For example, how can one measure the value of rideshare services for the inner-city poor, which provide them with transportation to places that taxis almost never used to go (Uber and Lyft drivers don’t carry cash and so have much less fear of being robbed than did cab drivers)? What is their value for middle-class workers who no longer need extra cars to get to their jobs? Now they can pool with others for a single Uber car. Also consider that cell phones have provided poorer Americans with easy, cheap access to the internet. These are tremendous yet immeasurable benefits, brought about thanks to our economy of innovation.

The worst effect of the military and medical trillions in wasteful spending is still to come: the new push towards socialism by both Democrats and national conservatives. Left-wing socialism is familiar and treads a well-beaten path to bankruptcy, more waste, lost private initiative, and eventual political chaos.

But the national conservatives have now also signed on to the leftist analysis of our economy, and so also argue that free markets no longer work well enough. Americans may not be able to cut government spending, but they should at least understand the reason that living standards are static, so as not to worsen them through wrongheaded economic reforms.

John Basil Utley is the publisher of The American Conservative.