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War Debt & Collapse of the Empire

History is consistent in one important way. Empires always fall, and there are three main causes for the collapse. Succession crises, corruption and debt are what eventually bring them down. And the cause of debt is always an insatiable appetite for war – either from a need to defend the borders or expand them.

In the US today, there is no concern about succession, as our Founding Fathers made sure that wasn’t an issue. Corruption is certainly an issue, but it’s nowhere near Roman levels at this time. Debt, on the other hand is mounting rapidly.

What is the cause of that debt? Despite many deflections, it’s not caused by taking care of people. Our debt can be directly traced to our appetite for war.

Forget time – money is what really flies

The US debt is now over $21 trillion. This works out to over $127,000 per household, slightly higher than the $126,000 incurred by households themselves. While that may be horrifying enough, the household debt includes mortgages and other debt owed on physical assets – it’s not all household expenses run amok. The US government, on the other hand, is just debt. A solid $5.7 trillion is held by various governmental agencies, but $15.7 trillion is held by the public.

What caused all this debt? This piece is simply an analysis of three graphs provided by the Federal Reserve of St Louis as part of their public stats visualization system called Federal Reserve Economic Data (FRED). Let’s keep this simple.

We have to start with the debt by year since World War II. In 1947 it stood at $257 billion dollars, an incredible amount for the day that was the equal of the total US economy. Many feared it would swamp us and we would ever get on an even keel again. But times were good and there was hope. Let’s begin our story there.

Below is a chart of the deficit, or addition to the US debt, by year since 1947. Positive amounts are a surplus, paying it back, and negative amounts are a deficit where we borrow more. To even out inflation and other effects, it’s presented as a share of GDP or the size of the total economy.

As you can see, we started out with a surplus, paying back that crippling debt. That proved difficult to maintain as we went into the Korean War, but the 1950s were not a bad time for the debt. The net additions to it never topped 2% of GDP.

As time went on, however, it became more red. As the Vietnam War took more resources, deficit spending mounted in the 1960s. Coupled with the recession of 1974, it reached 4% of GDP before climbing back towards zero.

Then something strange happened. In the 1980s, the prosecution of the arms race at the end of the Cold War plunged the deficit deeper than ever before. It stayed between 4% and 6% through that whole period before climbing back up, slowly. And then in 2000, it simply fell off a cliff. The period marked by war in Afghanistan and Iraq added tremendously, and then the financial crisis of 2007 sent it into a deep dive.

Where recession marked deep spikes in the addition of debt, sustained wars mark most of the time the deficit went up. Here is another chart, one of defense spending as a share of GDP as well. It shows how spending on military generally follows these wars, but has a general downtrend. Still, it never goes below 4% of GDP total.

Defense spending as a share of GDP. Chart from the St Louis Federal Reserve (FRED).

That number is important. Global spending on defense, by all nations, amounts to $1.7 trillion. That’s 2.1% of the world GDP, meaning that on average the planet spends just over 2% of its national product on war or defense against it. That is also the NATO target for member nations, so it’s an important figure.

The US has consistently spend twice that amount, or more, even after the Cold War ended.

The difference between the global average and the amount spent by the US represents the cost of being the Global Policeman. It is the cost of what many around the world see as the American Empire, the military that enforces the standards of globalism that include the US Dollar as the currency of trade, English as the standard language, and US friendly regimes in most nations.

We can use the tools in FRED to take this amount out. Let’s say that, for the sake of argument, that our goal for defense spending should reasonably have been above 2% of GDP for some of this period. Let’s do this as a multiplier, and argue that rather than consider every amount over 2% as the cost of Empire that it’s always been about half of our defense spending.

The graph below is the deficit, by year, with only half as much defense spending, always as a share of GDP.

US Federal deficit by year, with half of defense spending taken out. Chart from the St Louis Federal Reserve (FRED).

Note that we now run a surplus rather consistently until the 1980s. There is still a deficit, but it’s much lower. The terrible decline in revenue from the crisis of 2007 also appears much more manageable. Without the cost of empire, the graph looks very different.

In fact, by this simple chart, with half of our defense spending removed, we have no debt at all. The debt from WWII was paid off by 1960 and the surpluses run up in the 1990s were more than enough to cover the cost of the coming depression in the 2000s.

All this stuff is expensive.

This is not without any defense spending. It’s with half as much over the postwar period. There is still a lot of money allocated for our military, simply not the very high level we have today. As noted before, our defense spending is more than four times the second highest nation, China. It is 41% of the total spent on the planet, and the US plus its allies accounts for three quarters of all military spending.

Cutting the amount we spend in half is not only reasonable, it is indeed something which could have been done if we had not pursued so many wars around the world or the arms race in the 1980s. It is certainly something which can be done today.

What caused the US debt to run up so very high? It is very easy to make the argument that the $127,000 per household in US debt is entirely due to our status as an Empire. The additional cost of our military, above and beyond that of other nations, accounts for all of our debt. Not just some, but all of it.

Like so many empires that have fallen before, the American empire is in danger of falling because of the debt that it ran up from a nearly endless cycle of war.

2 thoughts on “War Debt & Collapse of the Empire

  1. Pingback: Coming Out Even | Barataria - The work of Erik Hare

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