LILIAIII
I don't think the url given above works so i tried to copy and paste--i think it's worth the trouble i've put into this. if you scroll to the bottom of this, the url there might work.
Benefits of a
Slimmer Pentagon
by ROBERT POLLIN and HEIDI GARRETT-PELTIER
Despite claims to
the contrary, cutting military spending could actually boost the economy.
Robert Pollin,
professor of economics and co-director of the Political Economy
Research Institute
(PERI), is the author of the forthcoming Back to Full
Employment (MIT
Press). Heidi Garrett-Peltier is assistant research professor
at PERI. The authors
gratefully acknowledge the financial support on
this issue from Ben
Cohen.
May 28, 2012 The Nation. 15
Should the enormous US military
budget—which is
more than double the
combined levels of military
spending by China,
the United Kingdom, France,
Russia and
Germany—be cut? This question is finally
on the table, thanks
to the winding down of combat
activities in Iraq
and Afghanistan and to Washington’s obsession
with tamping down
the federal deficits that have arisen from the
Great Recession.
Many who would like to protect the military
from the budget
knife raise economic arguments to make their
case: Won’t cutting
military spending be bad for jobs, just when
we need to maintain
focus on reducing unemployment? Won’t
it threaten the
country’s long-term technological capabilities?
The matter assumed
increased urgency in November after
the Congressional
supercommittee
failed to agree on a deficitreduction
plan. This failure
set in motion an agenda for automatic
cuts—or
“sequestration” of funds—from military and
nonmilitary budgets
beginning in January 2013. According to
the sequestration
scenario, absent the adoption of a large-scale
deficit-cutting
plan, military and nonmilitary spending would
face $55 billion per
year in automatic cuts over a decade, relative
to previously
established spending levels. If Congress and
the White House
devise a way to exempt the Pentagon from
the automatic
cuts—as seems increasingly likely—
the cuts will
instead be taken from healthcare, education, social spending,
infrastructure and
the environment.
Of course, framing
the deficit issue in terms of military versus
social spending cuts
ignores other options, such as raising
taxes on the
wealthy. It also erroneously assumes that reducing
the federal deficit
is necessary now, before the economy has
settled onto a
sustainable recovery path out of the recession.
Even more fundamental,
today’s debate largely skirts the question
of what the military
budget needs to be after Iraq and
Afghanistan, and
fails to grapple honestly with the impact that
major military
spending reductions would have on the economy,
especially in terms
of job opportunities and technology.
Members of today’s
military-industrial complex—the constellation
of forces, including
Democratic and Republican politicians,
weapons
manufacturers, lobbyists and the Pentagon leadership,
whose influence
President Eisenhower warned against in 1961—
claim that
significant reductions in the military budget would
decimate US defenses
and inflict major damage to the economy.
In fact, these
claims are demonstrably false.
.
The Proposed
Spending Cuts Are Modest
Defense Secretary
Leon Panetta has stated that the planned
cuts in the military
budget would result, over a decade, in “the
smallest ground
force since 1940, the smallest number of ships
since 1915 and the
smallest Air Force in its history.” Panetta
has said repeatedly
that the cuts would amount to nearly
$1 trillion. That
does indeed sound like a lot, given that the
annual level of
total military spending is about $700 billion.
But what Panetta and
others call $1 trillion in cuts is actually
an annual $100
billion reduction added up over ten years to
produce the
huge-sounding $1 trillion figure. In reality, moving
from a roughly $700
billion to $600 billion annual budget
is hardly extreme,
especially when we consider that this includes
cuts tied to ending
the US combat role in Iraq and Afghanistan.
The 2012 budget for
these two wars alone is $115 billion, and
the planned budget
for 2013 is $88 billion, even after combat
is over. The
Pentagon has also included for 2014 onward a
baseline contingency
budget of $44 billion annually for any
carryover
fighting in Iraq or
Afghanistan, or new wars elsewhere.
Thus, by the
Pentagon’s own estimate, winding down
Iraq and Afghanistan
will end up saving $44 billion a year after
2013. In the
unlikely event that the budgetary sequestration
cuts are carried
out, an additional $55 billion per year would be
cut. That’s how we
cut our way from a $700 billion to $600 billion
annual military
budget.
The graph on page 17
provides some perspective on these
figures. As we see,
last year’s $700 billion military budget represented
4.7 percent of the
country’s GDP. This was higher
even than in 2008,
Bush’s last year in office, when defense was
4.3 percent of GDP.
In 2000, Bill Clinton’s final year in office
and before the 9/11
terrorist attacks, military spending was
3 percent of GDP. In
today’s economy, the difference between
a military budget at
3 percent of GDP versus 4.7 percent is
$260 billion. Thus,
if we were to return just to the 2000 level
of defense spending
as a share of the economy, that would itself
entail “budget cuts”
of about $1 trillion over four years (i.e.,
$260 billion per
year for four years).
If all the cuts
being discussed today were enacted—including
the $55 billion in
sequestration cuts, which, again, seems highly
unlikely—the military
budget would return to about 3 percent
of GDP in 2017,
according to the Defense Department’s
budget forecast as
well as the Congressional Budget Office’s
projections. This is
assuming—perhaps implausibly—that the
United States does
not engage in new wars between now and
2017. If we do end
up fighting more wars, the budgets to pay
for them would be
exempt from spending caps. The sky would
be the limit. In
short, aside from winding down the Iraq and
Afghanistan wars,
the military cuts being considered are modest
and easily
reversible.
Better Ways to
Create Jobs
The primary economic
argument made by members of the
military-industrial
complex against cutting the Pentagon budget
is that it would
produce major job losses. One widely cited
report by Stephen
Fuller of George Mason University found
that 1 million jobs
would be lost through the annual cuts set by
the sequestration
agreement. The Pentagon claims that military
cuts in the range of
$1 trillion over the next decade would raise
unemployment by one
percentage point per year—from, say,
8 to 9 percent. It
is hard to assess the accuracy of either of these
claims, since
neither Professor Fuller nor the Pentagon has provided
details about how
these estimates were reached.
In any event, it is
indisputable that the Pentagon is a major
employer in the US
economy. How could it be otherwise, given
that the Pentagon’s
$700 billion budget is equal to nearly 5
percent of the GDP?
In fact, Pentagon spending as of 2011 was
responsible for
creating nearly 6 million jobs, within the military
itself and in all
civilian industries connected to it. In addition,
because of the high
demand for technologically advanced
equipment by the
military, a good share of the jobs created are
well paid and
professionally challenging.
However, the crucial
question is not how many jobs are created
by spending, for
example, $1 billion on the military. Rather,
it is whether
spending that $1 billion creates more or fewer
jobs when compared
with spending $1 billion on alternative
public purposes,
such as education,
healthcare and the green
economy—or having
consumers spend that same amount of
money in any way
they choose.
In fact, compared
with these alternative uses, spending
on the military is a
poor source of job creation. As
we see in the graph
(right), $1 billion in spending on the
military will
generate about 11,200 jobs within the US
economy. That same
$1 billion would create 16,800 jobs
through clean energy
investments, 17,200 jobs within the
healthcare sector or
26,700 jobs through support of education.
That is, investments
in clean energy, healthcare and
education will
produce between 50 and 140 percent more
jobs than if the
same money were spent by the Pentagon.
Just giving the
money to households to consume as they
choose would
generate 15,100 jobs, 35 percent more than
military spending.
To make these
estimates, we considered three distinct channels
through which
spending on any project creates jobs. First
are the jobs
directly involved with the project in question—for
example, building an
F-35 fighter jet, or undertaking an energyefficiency
retrofit of the
government’s existing building stock. In
addition, new jobs
result when the F-35 or building retrofit project
buys supplies. The
supplying industries would include steel,
glass, tire and
electronic producers for building an airplane; and,
for the retrofit
project, firms that produce windows, insulation,
and heating and
cooling equipment. Finally, job opportunities
will expand when the
people newly hired for the F-35 or retrofit
project start
spending more money, since they now have more
in their pockets.
This could include a newly hired computer
programmer on the
F-35 project finally feeling financially able
to replace a clunker
car, or a window installer on the retrofitting
project taking a
previously unplanned vacation.
But why do we get so
many more jobs per dollar of spending
through investments
in healthcare, clean energy and education
than through the
military? The reasons are straightforward:
§ Spending on
people versus everything else. Retrofitting buildings
entails hiring lots
of electricians, carpenters and roofers,
with a relatively
modest level of spending on machinery,
energy, land and
heavy-equipment hauling. Building the F-35,
by contrast, entails
heavy investments in electronic equipment
and carefully
treated steel, glass and other materials, with less
need to hire people.
§ Spending within
the US economy versus other countries. Even
with the ending of
direct involvement in Iraq and Afghanistan,
the overall amount
of overseas spending by the US military and
its personnel will
remain far higher than when funds are spent
on domestic
investments in healthcare, clean energy and education.
When a higher
proportion of a given pot of money is spent
within the country,
more jobs are provided for US workers.
§ Differences in
pay scales. Average pay for all the jobs connected
with military
spending—including directly employed
personnel and those
working for military suppliers—is about
$60,000 per year. By
contrast, with healthcare, clean energy
and education, the
average annual pay is closer to $50,000, or
20 percent less. If
there is a given pot of money available for
hiring workers, when
you pay each person a higher wage, that
will create fewer—if
better compensated—jobs.
Does this mean
military spending creates more good jobs?
Actually, no.
Because spending on clean energy, healthcare and
education creates so
many more jobs overall—as much as 50 to
140 percent
more—these investments also create larger numbers
(if lower
proportions) of decent- to good-quality jobs than
the military, as
well as many more low-paying jobs.
Considering only
jobs paying at least $32,000 per year,
clean energy and
healthcare both generate well more than
the military, while
the figure for education spending is more
than twice as high.
Considering a still narrower category of
jobs—only those
paying $64,000 or more per year—the totals
for clean energy and
healthcare are roughly comparable to
the military’s,
while the figure for education is double that for
military spending.
We should also not
dismiss the jobs paying below $32,000, in
which the totals for
clean energy, healthcare and education are
all at least twice
that for the military. It is certainly better to have
more low-paying jobs
available than no jobs at all. Low-paying
jobs can be improved
through union organizing, job training
and a reasonable
minimum wage, which should be $12 per hour
today. Also,
prospects for organizing to improve these jobs will
rise when there are
more low-paying jobs available. It is much
harder to fight for
improving job quality when the jobs are not
there in the first
place.
0
1
2
3
4
5
X X X X
Military budget as %
of GDP
HOW MUCH DO WE
SPEND ON THE PENTAGON?
4.3% 4.7%
3.0% 3.0%
2000
2008
2011
2017
(Proposed cuts)
18 The Nation. May 28, 2012
We Need New
Industrial Policies
This past January a New
York Times article presented the view
that the most
serious negative economic consequence of the
impending military
budget cuts would not be on job opportunities
but rather on the
economy’s capacity to sustain a successful
high-technology
growth path. The Pentagon’s achievements in
nurturing the
Internet, jet aviation and other transformational
technologies from
inception to commercial success are indeed
significant.
However, given the massive resources the military
has devoted to
technology development, should we expect anything
less? Since the end
of World War II, the Pentagon has
spent more money on
R&D than any other entity on the face
of the earth. For
2011 the Pentagon’s R&D budget was about
$81 billion. This
was more than half of federal spending on
R&D and fully 20
percent of all R&D spending—public and
private—in the
economy. Moreover,
the Pentagon’s share
of
total US R&D
spending had been significantly higher still during
the cold war era.
Yet even these
R&D spending figures understate the scope of
the Pentagon’s
investments in technology development. This is
because the key
factor in the success of the program has not been
R&D spending by
itself. Equally important has been the way the
Pentagon’s
procurement policies create and sustain huge guaranteed
markets for the
products emerging from its R&D programs.
This is the main
theme of the late Vernon Ruttan’s book
Is War Necessary for
Economic Growth? Ruttan’s answer to
that
question is that war
is not necessary for economic growth but
that industrial
policies based within the Pentagon have been a
primary,
irreplaceable force for advancing US technical progress.
Ruttan saw this
combination—huge amounts of direct
R&D spending
along with maintaining guaranteed markets
for the high-tech
products being developed—as the foundation
undergirding the
Pentagon’s successful industrial policies. This
is what enabled
emerging technologies such as the Internet to
incubate slowly over
time rather than have to prove their value
prematurely to
private businesses and consumers. The incubation
period for the
Internet was about thirty-five years. The
R&D work around
such projects could therefore remain focused
on developing
high-quality products rather than on achieving
big-profit payoffs
as quickly as possible. By contrast, no private
business firm
operating on its own could possibly survive longterm
without being
laser-focused on profitability.
But in recognizing
the Pentagon’s achievements in industrial
policy, we also need
to acknowledge its outsized failures. The
Pentagon has a long
record of handing out noncompetitive,
gold-plated,
cost-plus contracts to its favored weapons suppliers
such as Lockheed
Martin and General Dynamics. The Defense
Department itself
reported in 2010 that nearly one-fourth of
all service
contracts put out to competitive bidding had only
one bidder. Under
such cozy arrangements, it is not surprising
that cost overruns
on military procurement projects—the difference
between what procurement
was contracted to cost
and what it actually
did cost—reached around $70 billion
over 2009–10. This
figure is roughly equal to the State
Department’s entire
foreign affairs budget for that period.
Such cost overrun
figures do not recognize the still more
fundamental matter
that continuing to maintain the gigantic
military-industrial
complex is not the most effective means
of advancing
national security. As Miriam Pemberton and
Lawrence Korb write
in their study “A Unified Security
Budget for the United
States,” “The death of Osama bin
Laden was
accomplished by means that resembled a police
action…. The decade
of war the United States launched in
response to the 9/11
attacks, at the cost of a trillion-plus dollars
and many thousands
of lives, has failed to accomplish a
goal that was
finally achieved at a tiny fraction of these costs,
through a
coordinated action of investigative work, diplomacy,
and minimal military
force.”
What are the lessons here? The United
States certainly
needs to continue
advancing large-scale industrial
policies to promote
the development of cuttingedge
technologies. But
the most pressing areas for
technological
development are not in ever more
dazzling weapon
systems but in clean energy, mass transportation
and high-end manufacturing.
Given these priorities, there
is no reason that
such industrial policies should continue to
be controlled by the
Defense Department. Indeed, as Ruttan
concluded—and as
Seymour Melman has also demonstrated
in Pentagon
Capitalism, The Permanent War Economy and other
works—having
industrial and technology policy dominated by
the Pentagon has
imposed heavy costs on the economy. As one
example, research
that would lead to the production of cheap
solar energy has
languished for a generation, with no significant
public support and
certainly nothing like the guaranteed markets
the Pentagon
provides for weapons producers.
The broader lesson
is also clear. If we are going to advance
beyond the past
decade of war and the wreckage caused by the
Great Recession to
build a stable, secure and environmentally
sustainable society,
we need to break the grip of the militaryindustrial
complex on the $700
billion military budget. That
is, we need to take
seriously President Eisenhower’s warnings
about the
“disastrous rise of misplaced power” wielded by this
nexus of forces. To
advance its aims, the military-industrial
complex is creating
a seriously distorted picture of the effect of
military spending
cuts on national security and the economy.
The way to fight
back begins with the simple task of presenting
the facts—and
advancing policies for a widely shared economic
revival grounded in
these facts. n
0
5,000
10,000
15,000
20,000
25,000
30,000
X X X X X
how many jobs does
$1 billion buy?
Total number of jobs
created
11,200
16,800
15,100
17,200
26,700
Military
Spending
Clean
Energy
Education
Household
Consumption
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