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Monday, February 14

The Opportunity Cost of $80 Billion

"War is a way of shattering to pieces, or pouring into the stratosphere, or sinking in the depths of the sea, materials which might otherwise be used to make the masses too comfortable, and hence, in the long run, too intelligent. "

George Orwell, 1984English essayist, novelist, & satirist (1903 - 1950)


Example


In the discipline of economics, a pure public good is a good that is non-rival and non-exclusive.

public good

"In economics, a public good is one that cannot or will not be produced for individual profit, since it is difficult to get people to pay for its large beneficial externalities. A public good is defined as an economic good which possesses two properties:

* It is non-rivalrous, meaning that its benefits do not exhibit scarcity from an individual point of view; once it has been produced, each person can benefit from it without diminishing anyone else's enjoyment.

* It is non-excludable, meaning that once it has been created, it is impossible to prevent people from gaining access to the good.

Public goods are "pure" when they possess these properties absolutely. Because empirically pure public goods are small in number (though they include such important cases as national defense and the system of property rights), in common parlance among economists the phrase "public goods" often refers to impure public goods or those confined to particular localities. A public good would be for society as a whole (the public), while a "collective good" is merely for a sub-set of society. "

In the US, however, the idea that National Defence is a public good is a fallacy, due to the fact that is IS excludable and it IS used for profit. As long as the US is allocating resources abroad to keep its military presence known, it is denying Americans the domestic protection they need at home.

US military force keeps the dollar afloat. The dollar is backed only by US debt. Few realize it, but the reason governments are able to borrow is because they have the right to tax the future labor power of their citizens. The US prints money to send abroad to purchase imports, yet it does not export a corresponding amount of goods to balance trade. Finding no US goods abroad to purchase, countries like China and Japan have two options: hold onto the dollar as a reserve currency (and give up seignorage to the US as it inflates away the value of these dollar holdings) or buy US treasuries. Most choose the latter.

In order to repay the debt, the US can either engage in real production (which involves using its military to secure access to resources used in production) or it can re-finance this debt by de-valuing the dollar against the currencies of nations that hold its debt. In real terms, it does not have to produce as much to repay the nominal value of this debt.

The US military backs US debt. As long as America's lenders (China/Japan) perceive that the US is "winning" the war on terror and for resources, they will be willing to lend it money. In order to win the war, however, the US has to use up resources by exporting more military force abroad. It has to go on the "offence" to put it in NFL terms that any American would understand.

The opportunity cost of offence abroad is a lack of defence at home. The US homeland is not as secure as it could be if the money were spent on protecting the citizenry. The Strauss-o-cons in the White House, however, seem to believe that the best defence is a strong offence. But is it really? Here is a look at the opportunity cost of just staying afloat in the war on terror:



If the administration expects a blank check for $80 billion every year to tread water in Iraq, the American people should be aware of what they could buy for their security instead:

$4 billion to provide the Coast Guard with the needed equipment to protect our coastlines. An additional $4 billion investment in the Coast Guard Deepwater Modernization program would cut in half the time it would take the Coast Guard to acquire new and modernize its old equipment so that it can more effectively secure our coastlines and harbors.

$5 billion to protect our ports and waterways from attack. The Maritime Transportation Security Act (MTSA), which is designed to protect our ports and waterways from terrorist attacks, requires vessels and port authorities to develop security plans. An additional $5 billion over 10 years would enable the full implementation of the MTSA.

$1 billion to implement a 100 percent screening system for air cargo. The Transportation Security Administration (TSA) currently screens only 5 percent of cargo transported on passenger aircraft. An additional $1 billion – representing a roughly 25 percent increase in funding for aviation screening – would result in a system similar to passenger luggage screening for cargo.

$10 billion to equip all of America's commercial planes with anti-MANPADS (Man-Portable Air Defense Systems) technology. An estimated 500,000 to 750,000 shoulder-launched surface-to-air missiles are still widely available at cheap prices on the world's black markets and pose a continual threat to our domestic aircraft. Viable onboard missile defense systems are available to airlines, but only our federal agencies have the resources to afford this technology and equip our planes.

$2.6 billion to meet the security requirements of the nation's rail and public transit systems. Despite al Qaeda's attack in Madrid a year ago, Congress only provided $150 million in rail security funding. An additional $2.6 billion would help to close a critical vulnerability in our transportation system.

$7.2 billion to more effectively track visitors to our country. The U.S. Visitor and Immigration Status Indicator Technology program (US-VISIT) is a data system that tracks the arrival and departure of non-U.S. citizens to and from the United States. The Government Accountability Office reports that the Department of Homeland Security has severely underestimated the cost of establishing smart ports of entry through the use of biometric technology. $7.2 billion over ten years would help to cover projected budget shortfalls.
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$3 billion per year to secure from theft the world's nuclear weapons-grade material. Experts estimate that a ten-year, $30 billion program backed by sufficient political and diplomatic investment would secure the nuclear weapons complex left over by the fall of the Soviet Union. Experts also estimate that another $50 million per year for several years would fund a "global cleanout program," aimed at removing dangerous nuclear materials from the most vulnerable nuclear sites worldwide.
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$9.6 billion per year to add four divisions to the Army. With commitments in Iraq and Afghanistan, the U.S. Army is increasingly stretched thin. The changing demands of the war on terrorism also require that we increase the size of the military to meet these needs over the longer term. Four additional divisions – or 80,000 soldiers – could be added to the Army over five years at a cost of $9.6 billion a year. A larger Army would help take the pressure off America's over-tapped National Guardsmen and Reservists.
$7 billion to double the number of active-duty troops in the Special Operations Forces. The United States has roughly 50,000 Special Operations Forces, including support personnel. These elite military fighting units played a critical role in Afghanistan and continue to be highly effective in tracking down terrorists. Doubling the size of the Special Operations Forces to 100,000 would cost an extra $7 billion per year.
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$20 billion to begin to fulfill U.S. commitments to the U.N. Millennium Development Goals. The U.N. Millennium Development Goals seek to promote security by attacking poverty and instability in the developing world. The project works by funding often simple measures like providing mosquito nets, building roads, improving ports, and providing medicine for diseases like malaria and AIDS. In 2002, President Bush endorsed the Monterrey Consensus, which urged rich countries to increase their aid contributions to 0.7 percent of GDP. The U.S. currently gives just 0.15 percent – far short of the target set at the Monterrey conference. A $20 billion increase in U.S. development assistance would represent a significant first step toward meeting the Millennium Development Goals, preventing instability and promoting a safer, more prosperous world.

$4 billion increase in the U.S. contribution to the Global Fund to Fight AIDS, Malaria, and Tuberculosis. This year, the United States is contributing just $250 million to the Global Fund this year. The Global Fund provides a unique approach toward international health financing by working in coordination with governments, civil society, and affected communities. The Fund relies on local ownership and planning to ensure that those affected get the help they need. A $4 billion increase in U.S. funding would significantly strengthen the Global Fund and would place the United States at the forefront in the battle against AIDS and other deadly diseases.
$3.5 billion to support democracy and development. The Millennium Challenge Corporation (MCC) has already helped developing countries advance their political, economic and social reform agendas. In FY2005, Congress provided the MCC with only $1.5 billion. The administration's own targets could be met with an additional $3.5 billion per year.
$1 billion to help countries undergoing political transitions. Proposed by the Commission on Weak States and National Security, the "country-in-transition fund" would establish a rapid response corps of technical experts who could deploy rapidly to post-conflict situations in countries like Sudan and Haiti to assist in the technical aspects of reconstruction and governance.

$1.36 billion shortfall in U.N. disaster assistance appeals. The U.N. Office for the Coordination of Humanitarian Affairs (OCHA), which helps to coordinate international responses to humanitarian crises, appealed for $3.4 billion to respond to all humanitarian disasters in 2004 and received just 60 percent of the funds that it required. For $1.36 billion the United States could make up the shortfall and properly assist all those in desperate need of humanitarian disaster assistance.

$556 million for the Global Peace Operations Initiative. The Global Peace Operations Initiative (GPOI) would expand global capacity for peacekeeping and stabilization efforts, particularly in Africa, and ultimately alleviate the burden on U.S. troops. The president originally committed $660 million over five years to GPOI, but only $104 million has been provided so far.
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$450,000 to fund a congressional inquiry to investigate the $8.8 billion missing from the budget of the Coalition Provisional Authority. An audit by the Special Inspector General for Iraqi Reconstruction found that the Coalition Provisional Authority (CPA), under the leadership of L. Paul Bremer, cannot account for nearly $9 billion of U.S. taxpayers' money. Where did the funds go? At one government ministry, 8,206 guards were on the CPA's payroll, but only 602 could be accounted for. A congressional inquiry would hold the administration responsible for its financial irresponsibility.


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