US Defense Secretary to take his ball and go home

June 22, 2011
London, England

In a recent interview with Newsweek magazine, outgoing US Defense Secretary Robert Gates lamented about not wanting to be part of a government that didn’t have the resources and gusto to support a trillion dollar military.

“I’ve spent my entire adult life with the United States as a superpower, and one that had no compunction about spending what it took to sustain that position… This is a different time. To tell you the truth, that’s one of the many reasons it’s time for me to retire, because frankly I can’t imagine being part of a government… that’s being forced to dramatically scale back our engagement with the rest of the world.”

There are some interesting conclusions to draw from this statement.

For one, Gates exemplifies the mentality of these career politicians who hold the highest positions of leadership: it’s as if they feel entitled to spend without having to deal with the inconveniences of fiscal reality. And if that’s not possible, he’ll just take his ball and go home.

Second, like most politicians, Gates seems completely disconnected from the real world. To Gates, out of control spending beyond your means is what it takes to maintain superpower status. In the real world, invading other countries and engaging in bottomless pit defense projects is a recipe for disaster.

Defense is the single biggest line item in the US budget, and along with Medicare and Social Security, these three programs completely dwarf the rest of the budget. Congress could completely eliminate the Department of Energy (which it should…) and only save $28.9 billion. Today this is just a rounding error.

Gates recognizes that the US government is going to be forced to live within its means and that Defense is going to get the axe. Unthinkable! But with an official budget of nearly $1 trillion (not counting supplementary, off-the-books packages), there’s more than ample room.

Aside from the obvious droves of unnecessary overseas bases that cost billions, the US military maintains expensive, antiquated systems like aircraft carriers and surface to air weaponry. They might have been useful in World War II, but today represent a financial sinkhole with little tactical benefit in modern warfare.

To give you another example, military units often procure necessary resources from local suppliers– this can be anything ranging from food to print cartridges to diesel fuel to remodeling services.

Curiously, supply clerks don’t have the freedom to buy from whichever vendor gives them the best price– they must patronize ‘specially approved’ vendors. In wartime, fiscal accountability goes out the window, and the amount of money flushed down the toilet with these specially approved vendors is staggering.

The simplest item like a pack of AA batteries can be sold to the military for ten times market price in wartime. It’s similar to the medical field. You take something normal like a plastic cup and it costs pennies. You make it a ‘medical cup’ and it costs $25.

This is nothing new.  In his memoirs, Ulysses S. Grant recounts similar observations when he was a young lieutenant in the Mexican War.

Grant describes how American traders and Mexican smugglers supplied US field units with horses, mules, and other necessary provisions. He remarks that the animals were typically worth $5, though the Army paid $8 to $11 each. “Such is trade, such is war,” he writes.

The official reason for this war was a supposed ‘invasion’ of Mexican forces onto US soil. There has never been any evidence to suggest that this ever happened, and historians acknowledge that the US government manufactured this story in order to draw the nation into an imperialistic war. I know, it hardly seems imaginable…

Grant describes the resulting war with Mexico as “the most unjust ever waged by a stronger nation against a weaker nation… following the bad example of European monarchies in their desire to acquire additional territory.”

He further argues that the war caused strain on the South’s agrarian economy, fueling the causes of the Civil War fought some 15-years later. As Grant reflects, “Nations, like individuals, are punished for their transgressions. We got our punishment in the most sanguinary and expensive war of modern times.”

(His book, The Personal Memoirs of Ulysses S. Grant, is available for free download on Amazon.)

Grant’s words ring true: actions have consequences. Yet when a nation’s leaders still seem to think that they require a $1 trillion military budget for its “engagement with the rest of the world” despite 10-years of war and fiscal insolvency, it’s a safe bet that the consequences won’t be rose petals and unicorns.

About the Author

Simon Black is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.