The Tip of the Iceberg

by Dave Schuler on January 8, 2014

In his farewell address Dwight Eisenhower called the country’s attention to what was then a new and serious threat to it:

Now this conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence — economic, political, even spiritual — is felt in every city, every Statehouse, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources, and livelihood are all involved. So is the very structure of our society.

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.

Over the intervening years that threat has not abated. If anything, it is worse. Sadly, Ike only saw the tip of the iceberg. Later years saw the extension of the military-industrial complex, greatly abetted by the work of a later president, Lyndon Johnson, into healthcare, finance, education, and many other sectors of our society.

Today on top of the military-industrial complex there is a medical-industrial complex, a regulatory-financial complex, and an educational-organized labor complex. There’s a political-journalistic complex that ensures that the correct messages are promulgated and a federal bureaucracy with a primary objective of seeing to it that problems give the appearance of being addressed without actually solving any.

These various complexes work synergistically to absorb any and all resources thrown at them. Do you wonder why we’re spending so much more in real, per capita terms on our military, financial, healthcare, and educational systems than we did fifty years ago with such mediocre results? That’s it.

And that’s why my policy preferences lean towards changing incentives. We can’t just spend our way out of our problems.

{ 10 comments… read them below or add one }

... January 8, 2014 at 9:49 am

And that’s why my policy preferences lean towards changing incentives.

This will never happen with the current two party system. I have no idea how to fix the issue.

Ben Wolf January 8, 2014 at 11:54 am

These various complexes work synergistically to absorb any and all resources thrown at them. Do you wonder why we’re spending so much more in real, per capita terms on our military, financial, healthcare, and educational systems than we did fifty years ago with such mediocre results?

Translation: flows matter.

I couldn’t agree more, Dave. These parasitic institutions have placed themselves at key point of the country’s financial infrastructure to dam up and absorb financial flows. While they enrich themselves they also dry up the millions of little branches and creeks which would normally spring out, creating the economic equivalent of drought.

It’s also akin to having a leaky pipe: you need a certain flow rate on the other end so you increase the pressure to get more through. Unfortunately this increases the rate of leakage and accelerates the ultimate demise of the plumbing, at which point nothing will get through at all. In our sclerotic economy spending increases can get more through, but the institutional dams collect more of the flow and grow larger.

We can either build an alternate infrastructure or tear the whole thing down. I prefer the former because it’s likely to mean less violence.

... January 8, 2014 at 12:40 pm

Translation: flows matter.

Something every mobster knows, which is why they always want a “taste”, instead of just emptying the cash register once.

... January 8, 2014 at 12:44 pm

We can either build an alternate infrastructure or tear the whole thing down. I prefer the former because it’s likely to mean less violence.

I prefer the latter because I’m not aware of any large, entrenched governmental structure in this country ever going out of existence without being torn down completely.

TastyBits January 8, 2014 at 1:30 pm


Definition: “Circulating money borrowed into existence.”

Like musical chairs, money is circling a fixed amount of real value. In musical chairs, there is one empty chair, and one person will lose. If more people want to play, more chairs are added, and there will still be only one loser.

The way bubbles work is that more players are added, but not as many new chairs. When money is created, it is actually borrowed into existence, but this borrowed money has no corresponding asset (chair) added. In order to keep the bubble from collapsing, everybody must move (“flow”) faster.

It would be like a balloon with a hole. you need to keep blowing more air to keep it inflated, and if the hole grows bigger, you need to increase the air you are blowing.

This is MMT flows. Borrow more money into existence, and have it “flowing” as fast as possible. As long as the players keep moving (“flowing”) everything works great, but when the music stops …

In 2008, the music stopped, and now they are trying to get it “flowing” again. The stimulus was supposed to kick-start the economy, but apparently it was 10 or 20 trillion dollars too small.

Ben Wolf January 8, 2014 at 2:11 pm


One day you’ll figure out that not everything is about everything.

TastyBits January 8, 2014 at 3:37 pm

@Ben Wolf

Actually, everything is about the hustle. We are all being hustled, and we are all hustling. Some like Warren Buffett or John Gotti are a lot better at it than others.

If you want a different perspective, look at the world from a hustler’s perspective. MMT has realized that what we are seeing are shadows cast upon the cave wall. There is still a door to the outside world.

TastyBits January 8, 2014 at 7:03 pm

Honestly folks. I am going to temporarily stop being a cantankerous, misanthropic, pessimistic, old coot. It really ain’t all that bad.

Yeah, the system is rigged. Always has been. Always will be. Throughout history, it is better sometimes, but most times it is worse. The wealth, luxury, and freedom we experience have been shared by few. Athens, the Roman Republic, Renaissance Italy, and and a few others can be included.

The internet has caused political discourse to become more inflamed, but it has also allowed it to become more widespread. This will be the impetus for a new cycle. You can see political opponents/enemies beginning to cooperate on a few issues. These will eventually cause realignments.

A Theodore Roosevelt will eventually come along, because he is needed. He/she has been out there, but their time has not come yet. It will be somebody who takes on all the special interests, and this will not just result in the usual “nobody liked the deal”.

You will know that real change has begun when the Democrats, Republicans, insurance companies, doctors, pharmaceutical companies, CNBC talking heads, etc. begin the pulling of hair and the gnashing of teeth. When they are all using the same talking points without trying to score political advantage, change has come.

(Like it or not, President Obama was what was needed at the time.)

Until then “Party Like It’s 1999″

jan January 8, 2014 at 8:57 pm

The “military industrial complex” warning, articulated by Eisenhower, was a remembered moment in his presidency, giving these final words a sobering veneer of prescience. Dave’s comments, extending enlarged appetites for power to other vital sectors, such as health care, education, financial institutions, journalism, education, is also noteworthy. I don’t know, though, if the public is mindful enough about what is going on around them until it poses some kind of personal intrusion, or renders a negative consequence directly onto them. Instead, people seem oblivious, uninterested to the mushrooming of power that is literally molding their world, enveloping them with rules and regulations that ultimately restrict freedoms and individual choices.

For instance, health care is now run at the discretion of government bureaucrats in collusion with insurance companies. Education is in the hands of powerful unions. Big financial institutions are emboldened and stronger, while community banks are being squeezed out, under Dodd-Frank legislation. Journalism is no longer a trusted investigative source, serving to have rigorous oversight over government practices and foreign affairs without political bias. Everything is delivered by the big, for the big and in a very partisan fashion. The roles citizens play are simply to finance the decisions and lifestyles of ‘big’ guys, who often use these revenues in frivolous, wasteful, partisan ways, and then ask for more to spend.

Ben’s analogies of damning up and absorbing the flows of money, as well as the absurdity of sending more water down leaking plumbing are good ones. I would make another one, dealing with stimulating (incentives?) the growth of the economy, to trimming and cutting back plants annually, causing new shoots of growth each year. We have so much bureaucratic overlap, waste, useless or abandoned military equipment, stagnant, under-performing social programs, empty federal buildings all soaking up monies that could be prudently used elsewhere. Our government and entitlement programs are inefficient, filled with cronyism and corruption, and yet all politicians do is wrangle about raising taxes and how to enroll more people in more social dependency programs. Very little is ever addressed in seeking long term, real solutions to the root of our problems. And, by doing so we only seem to be aiding and abetting the political, corporate, military elite, who in turn usurp even more power from the people in order to put a bigger thumb on their individual liberties.

jan January 9, 2014 at 9:31 am

Education is in the hands of powerful unions…..

….and the powerful DOJ (Holder) and DoEd (Duncan).

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