America’s checkbook

In my circles, there’s an oft-heard idea that goes something like this: “If you want to know where someone’s heart is, look at the entries in his (her) checkbook.”

In an era of on-line banking, a “checkbook” is an antiquated tool, destined for history’s dustbin. But we all get the idea. If I say I love my wife but my biggest expenses are for the bass boat, the Harley, the golf clubs and the club membership, and the trips to the hunting lodge, maybe I have some explaining to do. If we say we dote on the kids but the checkbook shows we farm them out to camps for the entire summer while the two of us go to Europe, maybe they don’t mean as much as we claim. If we claim to be financially conservative but we’re only making minimum payments on the credit cards and our debt load is rising out of sight, maybe we’re self-delusional.

So, what happens if we apply this yardstick to ourselves not as individuals, but as a nation?    

For today’s post, let’s consider four aspects of America’s finances: our national debt as a fraction of GDP, our defense spending, our non-military foreign aid, and investments in Earth observations, modeling, science-based services, and the like.

Why pick these particular checkbook entries? Because they’re illuminating…and because they’re maybe related more than we might like to admit.

Here are (rough) estimates of these figures:

U.S. national debt ~ $14Trillion (versus ~ $6Trillion in 2000)

U.S. GDP ~ $14Trillion/year (versus ~ $10Trillion/year in 2000)

Debt/GDP ~ 100% (versus ~ 60% in 2000)

Defense spending ~ $1Trillion/year

Non-military foreign aid ~ $35Billion/year

Earth science and science-based services ~ $10Billion/year

My apologies for failing to cite sources. But you can Google around and get your own numbers. They’ll vary some but these figures will be close. That little squiggle? In my field, it means “order-of-magnitude,” not “equals.” A figure of ~ $10B means “it’s not as small as $1B, but it’s not as big as $100B either.” [Actually, these figures ought to be a lot more accurate than that; the main idea here is the relative size.]

What conclusions might we draw from these statistics? First, comparing national debt to GDP, it appears our finances are in a more perilous state now than ten years ago. As we all know, most of this shift has occurred since 2008, and was the result of draconian efforts to save the world’s economy. Let’s remember the rudiments of that story. In the forty years prior to 2008 the U.S. financial sector grew from 4% of GDP to 8%. A large part of this came from what some call financialization of the economy (sounds like “churning” to this lay ear). In the late 1950’s, annual market trading of securities was comparable to (just a little more than) GDP. By 2007, it had become 50 times greater. The “wealth” this created proved partially illusory. Some of what we thought was economic growth was really an accumulation of debt.

Next we might note that the defense portion of our budget is rather substantial. In fact, it represents over half of world expenditures on defense (coming from 4% of the world’s population). Before you say that’s out of line, think about it. This is the investment we make to ensure the survival of democracy, cultural values, and stability we hold dear. Were we to lose those, there might well be no getting them back. Now a lot of analysts tell us that these expenses, or some fraction of them, have to be seen as a subsidy for the low prices of oil and gasoline at the pump that you and I enjoy. [We should all come up to speed on this discussion. Some of the figures on the web appear to attribute half or more of all defense costs to this end; that seems extreme.]

Now compare the defense budget with the non-military foreign aid. It’s about 30 times greater! A lot of people have made arguments to the effect that much foreign aid, especially disaster relief, is a form of co-dependency which isn’t helping either donor or recipient all that much. But the fact of the matter is it looks like we’re spending a lot less on helping our neighbors in need than we are on protecting ourselves from them. And appearances matter here, especially to the rest of the world.

All these figures dwarf what we’re spending to better understand the Earth we live on, in order to more effectively derive benefits from the resources it offers, protect those ecosystem services we count on, and mitigate against natural hazards.

These figures are all related. Here’s just one example of how they might connect. Our international neighbors also need that information about the Earth. They, like us, are seeking to maintain their fresh water supplies, grow the food they need, meet their energy requirements, and all the rest. We could all do a lot more to pool our resources and learn together about our planet. Maybe an additional ten billion dollars spent here might be far more welcome to other countries than our current forms of foreign aid to them. We don’t need to guess. The dollar amounts are so small we can afford to try it and actually see what response we get.

In this way, small adjustments in US investments in Earth observations, etc., if done with an eye to international cooperation toward building a shared knowledge base, might possibly improve everyone’s economy, ease tensions, and allow us to reduce those defense figures just a fraction. If we doubled our investment in observations and modeling, and were able reduce military operations (about a third of the DoD budget) by as little as 0.3%, we’d still break even. And smarter use of Earth resources, slightly lower property losses and economic disruption in the face of natural hazards, and maintenance of environmental services just might help us start whittling away at that dangerous level of national debt.

One key to realizing all this? Improved trust between and among nations. More on why that matters in the next post.