By Stephen Semler
Abstract: The US military budget is speeding toward the $1 trillion mark. While the dramatic increase in military spending under the Biden administration is justified in the name of security, food and financial insecurity rates in the US have grown every year since 2021. What’s more, the surging Pentagon budget is aggravating the national security problems it was supposed to solve. The legislation proposed here refunds taxpayers for this military buildup. If enacted, it will send hundreds of millions of households another round of $600 tax rebates, paid for by the savings from reverting this year’s Pentagon budget to 2021 levels. Human security conditions would improve immediately at no cost to national security.
Citation: Semler, Stephen, 2024. “Returning public funds to the public: A plan to convert excess US military spending into $600 tax rebates,” Security in Context Policy Paper 24-01. January 2024, Security in Context.
Introduction
The United States is preparing to spend more on its military this year than it spent on average during World War II. Between the $886.3 billion in the standard military budget and the $62.2 billion for Pentagon programs in a separate foreign aid bill, party leaders in the US Congress plan on approving nearly $950 billion in military spending for fiscal year (FY) 2024. By comparison, the average annual US military budget from FY1942–1945 was $877 billion, in inflation-adjusted terms.
Even without the “supplemental” funding for the Pentagon in the foreign bill, the “base” budget authorized for FY2024 is already the largest ever in nominal terms. At $886 billion, it’s $146 billion larger than the last one Donald Trump authorized for FY2021. While Trump managed to balloon annual US military spending by an astonishing 20 percent in four years, Joe Biden is set to accomplish the same feat in just three.
Biden’s military buildup is supposedly in the name of security. However, human security conditions in the US are deteriorating. While the Pentagon budget has grown 20 percent since FY2021, food insecurity has increased by 28 percent and financial hardship by 31 percent. What’s more, country leaders have yet to produce compelling evidence that national security conditions have improved either. In some cases, the recent surge in military spending appears to be worsening the very problems political and military leaders said it would solve.
The US Congress should refund the taxpayer for this military buildup. The legislation proposed here would set the FY2024 Pentagon budget at FY2021 levels and return the savings to the public through a tax rebate. If enacted, hundreds of millions of Americans would receive another round of much-needed $600 tax rebates and annual US military spending would remain well above Cold War highs, even without the additional Pentagon funding in the pending foreign aid bill. Human security conditions would improve immediately.
More military spending doesn’t mean more security
The general reasoning behind Biden’s military buildup is consistent with Trump’s: In order to ensure its national security, the US must dramatically enhance its warfighting capabilities in order to outcompete rival powers, namely, China and Russia. Critically, because this competition is thought to be indefinite, the US must finance this progression in combat power indefinitely. The working theory underlying the Pentagon’s budget for the last two administrations has been indistinguishable from one that simply declares, more spending, more security.
The line between military spending (a measurable output) and security (a desired outcome) is routinely blurred in political speech, if not in practice. For example, Biden described the FY2023 Pentagon budget as “among the largest investments in our national security in history,” as if security was merely a commodity that can be bought with military appropriations. The Trump administration shared this assumption, asserting that “The surest way to prevent war is to be prepared to win one,” which is achieved through a “consistent, multiyear investment to restore warfighting readiness and field a lethal force.”
The presumed causal link between a larger Pentagon budget and enhanced security does not exist as advertised, particularly because it can increase the likelihood of war. The annual military budget reflects the resources military and political leaders say are needed to implement the country’s foreign policy strategy. In theory, a big military budget can be wholly independent of a bellicose foreign policy. In practice, money is policy. The ever-increasing Pentagon budget animates a militarized, ill-fated foreign policy strategy that provokes rather than prevents conflict with China. The surge in Pentagon spending during the Biden administration has sponsored an intensification of military activity in the Indo-Pacific. Even more weapons and troops are being dumped into the region, purportedly in the name of (preventing conflict through) deterrence. Provocation is a better word for it. Regardless of whether the US’s intentions are purely defensive, they’re not seen that way in Beijing, and a dangerous feedback loop has emerged as a result: Each country pursues actions perceived as threatening by the other, and each responds with countermeasures perceived as threatening in the same way.
A new approach is needed, and fast. Near collisions between US and Chinese military aircraft and ships have become commonplace, enough to prompt a response from Pentagon Secretary Lloyd Austin. “I’m concerned about at some point having an incident that could very, very quickly spiral out of control,” he said. Budgeting like war was inevitable has only made war more likely. Despite the obvious dangers, US taxpayers are forced to sacrifice more and more of their income on this doomed foreign policy strategy. Weapons companies and their allies in Washington benefit from this irresponsible statecraft, but most people do not. A foreign policy focused on war prevention must replace it. Divesting from the current strategy that tilts the field toward conflict might be a good place to start. A reduction in funding alone can’t fix bad policy, but it can help limit its damage.
Inflating the Pentagon budget in response to Russia’s brutal invasion of Ukraine won’t improve security either. Trump’s military buildup didn’t prevent the invasion and Biden’s won’t end it. Russia’s military has proved to be far weaker than most assumed, and has only become weaker — and no more competent — as the war has gone on. Exaggerating the threat posed by Russia’s conventional forces in order to put additional pressure on Moscow risks major conflict escalation.
As a practical matter, hardly any money for Ukraine’s military is sponsored by the Pentagon’s standard “base” budget. Since February 2022, more than 99 percent of the funds for US military aid to Ukraine have been appropriated through separate “supplemental” funding bills.1 Biden invoked Russia’s war in Ukraine as a justification to increase the Pentagon’s base budget to $886 billion in his FY2024 spending request, but nowhere in that proposal did he include money for another multi-billion dollar military aid package for Ukraine. Instead, he sought that funding through a supplemental foreign aid bill. This scheme likely contributed to delays in passing both base and supplemental military appropriations legislation for FY2024. The spending reduction in the proposed legislation below only applies to the Pentagon’s $886 billion base budget.
Military spending is a redistribution of wealth
The Biden administration often describes military spending as an “investment” in national security, but it’s better thought of as a redistribution of wealth. Based on recent contracting trends, more than half of the $886 billion FY2024 Pentagon budget will go to private sector contractors, and one-sixth to just five firms: Lockheed Martin, Raytheon/RTX, Northrop Grumman, Boeing, and General Dynamics. In FY2020, this handful of companies collectively received Pentagon contracts worth $158 billion — $17 billion more than the total cost of the $600 tax rebates authorized in December 2020. The profit-seeking behavior of these and other military contractors contributes to inflated procurement costs and defective equipment.
Implementing the United States’ (flawed) foreign policy strategy is far more expensive than it ought to be. Unconditional increases to the Pentagon budget have entrenched rampant profiteering by the arms industry. A recent 60 Minutes investigation found systematic price gouging by contractors on “almost everything” the Pentagon buys. On paper, contracts typically allow for private profits of 12 to 15 percent.2 In practice, contractors regularly secure profits of 40 to 50 percent and sometimes much more. These companies disproportionately invest profits into stock buybacks and shareholder dividends rather than independent research and development, largely passing off those costs to the public.
Far from promising security, more military spending doesn't even guarantee a stronger military. Contractors’ preeminent focus on profit maximization leads to frequent delays and shoddy craftsmanship on aircraft, seacraft, land vehicles, and other weapons systems. Lockheed Martin’s F-35 combat aircraft, for example, is the US’s most expensive weapon system, projected to cost at least $1.7 trillion over its lifetime. But the aircraft consistently fails to meet even minimum performance and reliability and maintainability standards. Corporate greed catalyzes these failures. The Government Accountability Office concluded that the F-35 — and several other military aircraft — “were not as reliable as promised” because contractors “prioritized schedule and cost over incorporating…key reliability practices.”3 Nonetheless, the contracting giant continues to be rewarded: The US Congress budgeted for 86 F-35s in FY2024.
Inefficiencies in the US “defense industrial base” can be fixed with enhanced oversight and public control. Throwing money at the problem will only exacerbate its underlying dysfunction, but that is the policy backed by capital.
Human security
Being secure on a human level means being free from fear, want, and indignity. The 1994 UN Human Development Report outlined seven dimensions of human security: economic, food, health, environmental, personal, community, and political. The main criteria associated with the first two include adequate household income and reliable access to basic nutrition.
Human security conditions are deteriorating inside the country that spends more on its military than the next ten combined. In 2022, the number of Americans in poverty grew by 60 percent — from 26 million to 41 million people — the largest documented year-to-year increase and the first significant hike since 2010.4 The child poverty rate more than doubled from 5.2 percent in 2021 to 12.4 percent in 2022 — also a record annual increase — and real median household income fell by 9 percent, from $70,460 to $64,240.5
These developments are attributed primarily to a sharp reduction in federal benefits from 2021 to 2022, especially social programs tailored to moderate- to low-income workers and families. In other words, people began getting a lot less in return for their federal income taxes. Many effectively started paying more income taxes as well: There were three rounds of tax rebates issued in 2020 and 2021, but zero have been issued since then. These rebates are credited with lifting 11.7 million people out of poverty in 2020 and 8.9 million in 2021.
Human security conditions continued to worsen throughout FY2023 and into FY2024 as the social safety net continued to atrophy. A review of federal data on financial hardship (defined here as people who had difficulty paying for basic household expenses in the last seven days6) and food insecurity (defined as people who didn’t have enough to eat in the last seven days7) — reveals an ongoing crisis. Since FY2021, food insecurity in the US has increased by 28 percent and financial hardship by 31 percent. So far in FY2024, there are 94 million US adults facing financial hardship and 28 million experiencing hunger.8 These average annual rates have grown every year for the last three.
The proposal
The outcome of the recent surge in Pentagon spending has been less security, not more, but political leaders in the US still expect a cash-strapped and hungry public to continue paying for it.Taxpayers deserve a refund instead. Here’s how.
The $886 billion Pentagon budget authorized for FY2024 is $146 billion higher than the amount authorized for FY2021. The cost of the $600 tax rebates distributed in late 2020 into early 2021 was $141 billion. The legislation proposed here rescinds this increase in military spending and returns the savings to the taxpayer through another round of $600 tax rebates.9
Just a few years ago, the US Congress distributed $600 tax rebates with great dispatch. In December 2020, the Consolidated Appropriations Act of 2021 authorized $600 tax rebates ($1,200 for those filing a joint tax return) plus $600 per qualifying child. Section 6428A(f)(3)(A) of the bill instructed the Secretary of the Treasury to send out the payments “as rapidly as possible.” The IRS began delivering the $600 tax rebates just two days after the legislation was signed into law.10
Human security conditions improved immediately. By mid-January 2021, financial and food insecurity rates fell 2.4 percent, liberating 9 million people from economic hardship and 6 million from hunger. What’s more, the number of US adults living paycheck to paycheck declined by 11.5 million from December 2020 to January 2021. In addition to covering basic household expenses, the $600 tax rebates helped tens of millions of people get out from under debt: More than half (52 percent) of recipients used their rebate to pay down outstanding balances. Another round of rebates could bring down Americans’ soaring credit card debt, which recently surpassed $1 trillion.
While this legislation barely makes a dent in the Pentagon budget — annual US military spending would still easily exceed Cold War highs — it would make an immediate difference for hundreds of millions of people,11 particularly those experiencing acute financial hardship and food insecurity.
Conclusion
The opportunity cost of military spending is ordinarily limited to a theoretical discussion. The legislation proposed here turns it into a concrete policy choice. It puts the burden of proof on policymakers to show that surging military spending produces more security than instantly improving financial well-being in 147 million households.12 Considering evidence that the recent military buildup has done more harm than good and the empirically verifiable and overwhelmingly positive security dividends of the $600 tax rebates, no policymaker would be able to.
Public opinion polls indicate that this legislative proposal would enjoy widespread support. Most Americans support reducing the Pentagon budget to fund things that address their urgent needs. For their part, tax rebates have always been hugely popular among the US public since at least the onset of the coronavirus pandemic, particularly because of how effectively they mitigated food and financial insecurity. The majority of Americans (63 percent) support a fourth round of tax rebates for inflation relief, while fewer than 1 in 5 (18 percent) oppose the idea. For those reasons, this legislation should appeal to any policymaker interested in representing the views of their base.
The legislation (for Members of Congress and their staffs)
Purpose: To reduce the bloated Pentagon budget by $146 billion and return the savings to the taxpayer through an additional round of $600 tax rebates.
Title: “Tax Rebates for Workers Act”.
Sense of Congress: It is the sense of Congress that—
(1) the ongoing human security crisis in the United States will not be resolved by even more military spending;
(2) historically high military budgets are not resolving the national security problems they purportedly solve;
(3) in order to improve the security of the country and the people living in it, military spending should be reduced and the savings returned to the taxpayer.
Part I—Refunding the American people for Pentagon excess: Amends the Internal Revenue Code of 1986 to provide for additional recovery rebates to taxpayers. Sample text (for Legislative Counsel review):
(a) In general.—Subchapter B of chapter 65 of the Internal Revenue Code of 1986 is amended by inserting after section 6428B the following new section:
“Sec. 6428C. 2024 recovery rebates to individuals.
“(a) In general.—In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by subtitle A for the first taxable year beginning in 2024 an amount equal to the 2024 rebate amount determined for such taxable year.
“(b) 2024 rebate amount.—For purposes of this section, the term ‘2024 rebate amount’ means, with respect to any taxpayer for any taxable year, the sum of—
“(1) $600 ($1,200 in the case of a joint return), plus
“(2) $600 multiplied by the number of qualifying dependents of the taxpayer for such taxable year.
The remaining text in Part I shall generally reflect the terms and conditions of “Section 6428A - Additional 2020 recovery rebates for individuals” (26 U.S.C. § 6428A added by Pub. L. 116-260, div. N, title II, §272a, Dec. 27, 2020, 134 Stat. 1965). The funds made available for the tax rebates by the offset in Part II shall be designated as emergency funds that are in addition to any amounts otherwise authorized to be appropriated for tax rebates, the Department of the Treasury, and any other discretionary accounts.
Part II—Offset: Makes an across-the-board rescission in budget function 050 discretionary spending for fiscal year 2024.
There is hereby rescinded $146,000,000,000 in budget function 050 discretionary budget authority for fiscal year 2024. The reduction shall not be taken from amounts authorized to be appropriated for military personnel or the Defense Health Program, or from designated emergency funding; and shall apply on a pro rata basis to all other accounts, programs, projects, and activities for which funds are provided for budget function 050 in fiscal year 2024. In the case of any relevant fiscal year 2024 appropriation legislation enacted after the date of enactment of this bill, the rescission shall take effect immediately after the enactment of such legislation. Because the need for this funding arises from unforeseen and unanticipated events, the amounts in this proposal should be designated as emergency requirements pursuant to the Balanced Budget and Emergency Deficit Control Act of 1985.
Citations:
1: The White House has already proposed $13.3 billion in military aid to Ukraine for fiscal year 2024. Over the last two years, Congress has appropriated over $92 billion in Ukraine military aid, much of it directed to contractors.
2: This is the typical range for fixed-price contracts.
3: Per the Government Accountability Office: “For example, the F-35 program deferred key reliability engineering activities intended to improve system designs until later in development. As a result, the program missed opportunities to identify, understand, and mitigate reliability issues early in the development process that could have reduced sustainment-related costs for the program.”
4: Based on the Supplemental Poverty Measure for 2021-2022, US Census Bureau (2023), Table B-3.
5: Based on Post-Tax Household Income, US Census Bureau (2023), Table B-1.
6: Financial hardship (or financial insecurity) is measured here by the responses to this Household Pulse Survey question: “In the last 7 days, how difficult has it been for your household to pay for usual household expenses, including but not limited to food, rent or mortgage, car payments, medical expenses, student loans, and so on? Select only one answer. 1) Not at all difficult 2) A little difficult 3) Somewhat difficult 4) Very difficult.”
7: Food insecurity is measured here by the responses to this Household Pulse Survey question: “In the last 7 days, which of these statements best describes the food eaten in your household? Select only one answer. 1) Enough of the kinds of food (I/we) wanted to eat 2) Enough, but not always the kinds of food (I/we) wanted to eat 3) Sometimes not enough to eat 4) Often not enough to eat.”
8: This is the average of the two Household Pulse Survey periods conducted so far in FY2024. The second survey period concluded October 30.
9: The cost of the $600 tax rebates issued in late December 2020 – early January 2021 was $141,471,824,000, according to the IRS.
10: Speed was an important factor in deciding how to provide financial relief to Americans suffering from the coronavirus pandemic. Tax rebates were likely chosen as the means through which to deliver that relief (as opposed to using additional unemployment insurance benefits or tax cuts) because the IRS is in the best position to readily send money directly to people. (BLS Working Paper 540, May 2021.)
11: There were 146,547,277 second-round rebates issued, according to the IRS.
12: This refers to the number of households that received the second-round tax rebates, per the IRS.
