War and Taxes
Two stories on the front page of the New York Times this morning reminded me of a historical precedent that may be useful to recall. The first story relates the increasing cost of deploying a single additional American soldier to Afghanistan.
The latest internal government estimates place the cost of adding 40,000 American troops and sharply expanding the Afghan security forces, as favored by Gen. Stanley A. McChrystal, the top American and allied commander in Afghanistan, at $40 billion to $54 billion a year, the officials said.Even if fewer troops are sent, or their mission is modified, the rough formula used by the White House, of about $1 million per soldier a year, appears almost constant.
The second story is the sad tale of an American President entering Beijing as supplicant before his banker.
When President Obama visits China for the first time on Sunday, he will, in many ways, be assuming the role of profligate spender coming to pay his respects to his banker. That stark fact -- China is the largest foreign lender to the United States -- has changed the core of the relationship between the United States and the only country with a reasonable chance of challenging its status as the world's sole superpower.
The historical analogy is to the city-state of Florence at the beginning of the 15th Century. The oligarchs that controlled the government of Florence at the time were always pushing Florence to go to war with Milan in order to control more land, which was of course the basis of wealth in this era at the very dawn of capitalism. The war against Milan in 1424 was extraordinarily expensive--Machiavelli estimated it cost 4,200,000 gold florins--and was paid for through a tax on income called the "estimo". The oligarchs, having most of their wealth in land, and being able to hide their true income, forced the average citizen or tradesman to bear a disproportionately large tax burden. The citizens, who never gained any of the land spoils of conquest, complained bitterly and were referred to by the financial elites as the "piagnoni", or "whiners". Of course the elites also gained by selling the armor and weapons to the city and because the Florence often hired both mercenaries and other cities to help fight the war, the battles continued because the surrogates were interested in prolonging the conflict for as long as their paymasters could afford it.
In 1427 all of this came to a breaking point. The Medici Bank which had been loaning money to the city refused to go further in debt and supported the piagnoni's call for a new tax on a citizen's entire wealth called a "castato" (register of property). This of course was much harder for the financial elites to escape and given that the Medici now had so much control over the city-state's finances and that the piagnoni were in full revolt, the castato was passed. And then a funny thing happened. Because the castato was determined each year based on the needs of the city, the oligarchs signed a peace treaty with Milan, because its cost was coming out of their hides.
I believe the day is coming soon when the average American piagnoni will wake up like the Florentines did. We may think of the teabaggers as our modern whiners, but like every working stiff in America they have been suckered into supporting the phony patriotism of the chicken-hawks and they are paying for the Trillion Dollar Wars in Iraq and Afghanistan. It is their sons and daughters who die on the battlefield, while the financial elites avoid putting their sons and daughters in harm's way and take home million dollar bonuses for trading Credit Default Swaps. And of course, the surrogates in our contemporary story are both the Blackwater mercenaries and the corrupt governments of Afghanistan and Pakistan anxious to prolong the "war on terror" so Uncle Sucker will continue to fund their regimes. But perhaps the Chinese will play the part of the Medici Bank, forcing America to tax the wealthy to pay for the wars that only seem to benefit their pocketbooks.
And then we may find our elites suddenly anxious to stop being the world's unpaid cop.
The problem is that China can't really force us to do anything. We owe then a trillion over a really long period of time, like 30 years. The debt isn't that bad compared to the time we have to pay it off and the economic output we'll generate in the years to come.
Meanwhile, China isn't really an emerging superpower. The vast majority of its citizens live in abject poverty. China is a mess.
That said, you're right that we shouldn't be wasting time money and effort on these expensive wars. Anything we can do to pay off China faster is to our benefit. Growing out way back to Clinton era surpluses would be both a psychological and real boon to our country.
But don't count on China to force us into better priorities. We have to do it ourselves.
November 15, 2009 2:50 PM | Reply | Permalink
They won't have to force to do anything. They'll prevent us from doing anything.
November 15, 2009 3:27 PM | Reply | Permalink
But they're a bit stuck at the moment. If they refuse to loan us any more money the sudden lack of demand for Treasury bills will drive down the dollar and thus drive down a very large portion of China's reserves. If I owe you $100 bluebell, then I have a problem. If I owe to $1 million, you have a problem.
November 15, 2009 3:29 PM | Reply | Permalink
At the moment maybe, but all they need is a few allies and if they set their mind to it they might find some. It's not only money. It's manufacturing. We're not going to be converting any washing machine factories into building tanks or all the pieces and parts that make up tanks and everything else. The point being that they and others know we can't and that sinks in over time. We're becoming an over extended paper tiger like the old USSR.
November 15, 2009 3:46 PM | Reply | Permalink
Yeah, you're right about the risks, as usual. "They need to prop up our debt to them" isn't exactly the strongest argument for our continued hegemony. It's just the only one we have!
November 15, 2009 3:58 PM | Reply | Permalink
We can only hope that "the Chinese will play the part of the Medici Bank, forcing America to tax the wealthy to pay for the wars that only seem to benefit their pocketbooks", or better yet as you say "stop being the world's unpaid cop". While we're at it we could tax them to pay for some other common goods by returning to a tiered tax structure not all that far distant in America's past.
November 15, 2009 3:16 PM | Reply | Permalink
Fascinating. I was having a similar conversation, minus the historical references, with a friend this morning.
We are approaching the end of empire as resources dwindle and debt needed for maintanence alone spikes. The assymetry between debt holders and the indebted has limits.
History does rhyme.
November 15, 2009 4:33 PM | Reply | Permalink
To relate an unsettling experience.
For the last several years, I have been purchasing the proof American Eagle gold coins from the US Mint. This last summer, I was informed, by a representative of the US Mint, that they weren't being produced this year because the blanks used to stamp these coins was in short supply as all available blanks were being used to produce "bullion" gold coins.
Then, within the last month, I was informed that the US Mint was completely discontinuing production of the fractional coins (1/10, 1/4, 1/2 ounce) versions completely.
My thoughts on this are that other countries are trading in their dollars for US gold.
BTW, The American Eagle .9999 fine silver coins are also in short supply.
Make what you want of it.
.
November 15, 2009 8:34 PM | Reply | Permalink
Spooky. But then gold has gone nuts the past couple of years, hasn't it? Supplies must be meagre. Which IS spooky.
November 16, 2009 11:08 AM | Reply | Permalink
The empire ended in 2001, maybe before. This is just the mercy event.
November 15, 2009 4:43 PM | Reply | Permalink
"We have been drawn into the world of permanent war by these fools. We allow fools to destroy the continuity of life, to tear apart all systems—economic, social, environmental and political—that sustain us. Dostoevsky was not dismayed by evil. He was dismayed by a society that no longer had the moral fortitude to confront the fools. These fools are leading us over the precipice. What will rise up from the ruins will not be something new, but the face of the monster that has, until then, remained hidden behind the facade."
http://michaelfury.wordpress.com/2009/11/11/forever-war/
November 16, 2009 7:53 AM | Reply | Permalink
Analogies -- especially ones culled from the distant past -- are always fraught with peril.
Florence, unlike the United States, was not the beneficiary of a fiat monetary system whose paper (from dollar bills to 1-year notes to 30-year bonds) is accepted in payment for goods and services, worldwide.
For many years, now, our "costs" of carrying out the wars in Iraq and Afghanistan, of defending freedom of the seas, of being able to threaten destabilizing nation-states, etc., have been paid by the people of Japan, China, and the GCC countries.
Until those people decide it's no longer in their interest to contribute to our costs of maintaining the imperium and stop "buying" our paper, our oligarchs have nothing to worry about.
November 16, 2009 8:10 AM | Reply | Permalink
Yep Ellen - that about sums up Jon's point.
Excellent post Jon. Really punchy and thought provoking - in a small space too.
November 16, 2009 10:09 AM | Reply | Permalink
True, the Anglo-American overclass has a history of war-mongering, chickehawkery, and a tendency to finance their wars with somebody else's blood and treasure.
Moreover, they are, today, mostly post-capitalist money-managers, transaction-lawyers, or other sorts of bi-partisan concession-tenders living off government concessions and indemnities. They are certainly not the adventurers, bankers, industrialists, or leaders of great parties in our 17th, 18th, 19th, or 20th century political-economic traditions.
Here is the problem with your Florentine analogy: It conflates the left-wing "merchants of death", "late-stage capitalism", "quagmire", and "war for oil" narratives which, today, are not consistent with what the Anglo-American overclass has now become. Their's is a "deal culture" and they cannot sustain a "long war" or, for that matter, robust economic policy of any sort. They have ohly their insider financial status and privileges that are residuals of the agro-military estabilishment left over from a century of Great, World, and Cold Wars.
Our problem is not the lack of a piagnoni but the absence of republican foundations for a responsible, two-party, democratic government.
What we really need is a "hard" center-left party -- not a coalition -- that can re-build the civic infrastructure of pre-Civil War Democracy in America, this time without slave labor.
Basically, we have competition between anglophile Northern and Southern Whigs with an essentially religious fringe of Unitarians ("Liberals") and Presbyterians ("Rednecks").
So, we do not have a popular constitutionalist party that, for instance, understands that the 2-3rd Amendments should prohibit a British-style long-term hire military and support a reserve-type military. That would be universal suffrage and a state monopoly on arms -- including what we need to provide population-centric counter-insurgency at home and abroad.
That was called a militia from the time of the Roman Republic. It is not an Anglo-Saxon fryd, even though that feudal institution comes from English Common Law, not in english but, rather, in Latin or, today, mumbo jumbo.
Some old terminology is not metaphor, it is or should still be operative and rigorously used, especially by Life Peers on the SCOTUS. (What are SCOVTVS POTVSQVE? Beltway Pig Latin?
November 16, 2009 9:05 AM | Reply | Permalink
Good, thought-provoking post.
November 16, 2009 10:42 AM | Reply | Permalink
Nice.
November 17, 2009 3:13 PM | Reply | Permalink
Sorry, that is SCOTVS POTVSQVE.
Picture the XXX "Below the Beltway" Legion standard with that legend and a talismanic cell phones, golf clubs, credit-cards, and hotel-room keys hanging from it.
November 16, 2009 9:26 AM | Reply | Permalink
The analogy about the war was brilliant. I suspect that as soon as the elites realize they'll have to pay their share of the war's monetary costs, it will stop.
If Rangel's idea of ensuring that the costs in lives and body parts is shared equally comes to pass, foolish wars will not be started.
November 17, 2009 8:24 PM | Reply | Permalink