Feed the Banker, Starve the Warrior

April 3, 2014

There are some huge topics that need honest and detailed debate in the current fiscal environment surrounding defense spending in the United States. The fates of multi-billion dollar platforms hang in the balance. Naval leaders, in their best Mahanian tradition, opine upon how the fleet is the smallest it has been since World War I and how tens of billions of dollars are required to keep carriers operational and the ship-building, industrial complex going. Army proponents claim that the latest round of budget-cutting proposals will drop troop levels to the lowest since before World War II and that more hundreds of billions are needed to keep hundreds of thousands of service members equipped with the “Right Stuff.” Strategists and industrialists all make compelling arguments about how the future of our nation depends on making the right decision now to compete against competitors in the future in order to justify annual defense budgets of nearly of $600 billion. This debate takes place under a national fiscal umbrella of a stalled economic recovery, a multi-trillion dollar debt, and little visible cooperation from any corridor in Washington, D.C. Yet amidst all the clamor of mind boggling numbers, the most reprehensible step by military and political leaders is to chop a mere $1 billion dollar subsidy to military supermarkets while continuing exponentially larger subsidies for record-setting bonuses to bankers on Wall Street. The warriors go hungry in the face of opulent bankers.

The Department of Defense maintains a system of 247 commissaries around the world. These “on-base” supermarkets offer products at cheaper prices to service members who live on base. The single consolidated commissary system for the entire Department of Defense is run like any large-scale corporation with a civilian CEO (Mr. Joseph H. Jeu since January 2011) and generates in excess of $5 billion in sales annually. The Defense Commissary Agency (DeCA) is committed to providing a quality benefit to service members while saving taxpayers’ dollars. In the 23 years of DeCA’s existence, the “disciplined integration of technology, infrastructure and business process improvements” results in a savings to a commissary patron of approximately 30% over shopping in the local commercial grocery store, or an annual savings of about $4,400 for a family of four. Adjudged consistently as “one of the military’s top non-pay benefits,” there is a cost. Taxpayers, to include the service members who use the commissaries, pay a subsidy of $1.4 billion dollars annually for the system to operate and provide this benefit in order to feed service members and their families.

In comparison, research papers released by the New York Federal Reserve Bank on 25 March 2014 indicate that fiscal policies afford the six largest banks a subsidy of $8.5 billion through the benefit of lower borrowing rates because these banks are “too big to fail.” The figures in the paper by economist Joao Santos pale in comparison to other research that states the subsidy to be as large as $102 billion through the same beneficial lending practices. The banks receiving the subsidy certainly did not need the subsidies described by Santos to make a profit in the last year. With Wells Fargo leading the way at $21.9 billion, the six banks totaled a profit of nearly $75 billion in 2013. Thanks to the efforts of Janet Yellen and the Fed, the banks earned a profit equal to approximately 15% of the Department of Defense FY2015 budget request on the back of a huge subsidy from the U.S. government. Of course, these banks took very good care of their employees by ensuring their subsidized profit was profusely dispersed. The reported bonus pool for New York City’s financial industry for 2014 exceeded $26 billion, or an average of over $164,000 per person, to a pool of employees nearly as large as the entire U.S. Marine Corps.

As the budget crafters for the Department of Defense look to cut the commissary subsidy by a paltry $1 billion, the population upon which the burden will fall is vastly different than the bankers benefitting from their industry’s subsidy. The military is a “young person’s game.” Those we ask to endure long deployments to Iraq and Afghanistan and die for our freedom are barely out of high school. Nearly 70% of the 180,000 enlisted Marines on active duty are 25 or under. About 50% of those same Marines are married and have families. Yet over 90% of them make less than $45,000 a year, or 26% of just the average bonus enabled by subsidies to a Wall Street banker. Over 75% of this same population of warriors earns less than $30,000 for themselves and their families. While bankers prosper, food stamp usage by military families at DeCA commissaries alone increased by 5% from FY2012 to FY2013. Food stamp use at DeCA facilities has quadrupled in the six years since FY2007. As the nation’s fiscal policies “feed” the bankers, the Department of Defense’s fiscal policies “starve” the warriors.

My colleagues and I teach strategic and operational war planning. At the strategic level, we strive to impart upon students the four elements of national power that are available to overcome strategic challenges. The tools available through Diplomatic, Information, Military, and Economic (DIME) means are many and varied. What is essential for any success, however, is the synchronization and integration of these four elements and the tools they provide. One of the huge challenges facing the future of the Department of Defense, and the nation’s fiscal future at large, is the lack of integration of these four elements at the highest levels. On one hand, through economic policies, our nation rewards, with almost unimaginably large monetary subsidies, bankers who do their business on the streets of New York. At the same time, the only way our nation can balance its military budgets is to undercut the families of the warriors doing their “business” on the streets Baghdad, Kabul, and numerous other locations around the world. I may not understand the politics of Washington, but a synchronized and integrated effort between Secretary of Defense Hagel and Federal Reserve Chair Yellen might bring about policies by which subsidies that richly reward bankers might be reduced in order to allow warriors not to “starve.”

 

Professor David Fuquea teaches within the College of Operational and Strategic Leadership at the U.S. Naval War College in Newport, Rhode Island. He served nearly 30 years on active duty as an infantry officer in the United States Marine Corps. He served combat tours in Iraq, Afghanistan, and a number of other contingencies around the world.

 

Photo credit: USAG – Humphreys