Books, Not Bombs: How Military Spending Hurts the Economy and Education Spending Helps

[McCamy Taylor]

Intro. An excellent question

Since military spending is a poor way of fighting recession, and it imposes significant long-term costs in terms of undermining innovations and economic growth, one must also ask why the country's political leaders turn to the military budget as a means of economic stimulation. Is it misinformation? Or are there political constraints and rationales that override economic considerations?

From “Fewer Jobs, Slower Growth: Military Spending Drains the Economy” by David Gold

http://www.thirdworldtraveler.com/Military_Budget/MilitaryBudget_Economy.html



I. “War Is Good Business, Invest Your Son”



Remember the antiwar button which carried the above slogan and a picture of LBJ, the president from Brown & Root? The Military Industrial Complex learned a lesson during the Vietnam War. If you ask people to squander their tax dollars fighting over a cause they do not quite understand, a fair number of them will say “Hell, why not? I’m a patriotic American!” If you ask them to sacrifice their flesh and blood for the same cause, they will vote you out of office.

Now, our wars are fought by volunteers, career men and women whose deaths can be portrayed as noble rather than tragic. It was their choice. They decided to put their lives on the line---

But guess what. We are still demanding that our children sacrifice themselves, whether they want to or not. Only now, our sons and daughters do not have to go off to die in another country in order to make that sacrifice. Now, they do it right here at home, where they grow up without decent health care, decent education, decent jobs, and all the other things we could have if our government did not rob us in order to enrich itself and a few very powerful friends through senseless war spending.

II. Tax and Spend Conservatives

The same folks who throw “Tea Parties” and who call universal health care a greater threat than Al Qaeda (I heard it on CNN!), get all excited when you talk about increasing military spending. Take this piece from the Wall Street Journal from late 2008.

The Department of Defense is preparing budget cuts in response to the decline in national income. The DOD budgeteers and their counterparts in the White House Office of Management and Budget apparently reason that a smaller GDP requires belt-tightening by everyone.

That logic is exactly backwards. As President-elect Barack Obama and his economic advisers recognize, countering a deep economic recession requires an increase in government spending to offset the sharp decline in consumer outlays and business investment that is now under way. Without that rise in government spending, the economic downturn would be deeper and longer. Although tax cuts for individuals and businesses can help, government spending will have to do the heavy lifting. That's why the Obama team will propose a package of about $300 billion a year in additional federal government outlays and grants to states and local governments.
A temporary rise in DOD spending on supplies, equipment and manpower should be a significant part of that increase in overall government outlays. The same applies to the Department of Homeland Security, to the FBI, and to other parts of the national intelligence community.

http://online.wsj.com/article/SB123008280526532053.html

You know, I used to think that the Wall Street Journal understood the economy, even if they did have their heads up their asses when it came to social matters. Looks like that is no longer the case.

More from Tax and Spend Conservative Feldstein from this January 2009’s Washington Post .

If rapid spending on things that need to be done is a criterion of choice, the plan should include higher defense outlays, including replacing and repairing supplies and equipment, needed after five years of fighting. The military can increase its level of procurement very rapidly. Yet the proposed spending plan includes less than $5 billion for defense, only about one-half of 1 percent of the total package.
Infrastructure spending on domestic military bases can also proceed more rapidly than infrastructure spending in the civilian economy. And military procurement overwhelmingly involves American-made products. Since much of this military spending will have to be done eventually, it makes sense to do it now, when there is substantial excess capacity in the manufacturing sector. In addition, a temporary increase in military recruiting and training would reduce unemployment directly, create a more skilled civilian workforce and expand the military reserves.

http://www.washingtonpost.com/wp-dyn/content/article/2009/01/28/AR2009012802938.html

Makes you wonder what kind of stock this guy has in his portfolio.

He is not alone. Even the “let’s drown the federal government in a bath tub” types at the Heritage Foundation want us to spend more on war. Here is an article entitled More Long-Term Defense Spending Needed.


http://www.realclearpolitics.com/articles/2009/04/22/more_long-term_defense_spending_needed_96110.html

Wow! Sounds like everybody on the right thinks that increased war spending will rescue our economy.

Well, almost everyone. DoD Buzz, a magazine aimed at the military, has a different opinion.

Advanced research on weapons is done mostly on computer, by a handful of big brains at national or industry labs. Modern weapons systems are very sophisticated, built to within exacting tolerances, require costly, precision and often hard to get parts and require highly skilled workers to assemble. Existing production lines can only be ramped up so much. There just are not vast “Arsenal of Democracy” assembly lines sitting idle that can be ramped up to churn out a Liberty Ship in under fifty days or 80,000 planes a year, as industry did during World War II.
Clearly, Feldstein does not understand defense spending very well. If he did, he would realize that $30 billion in the defense world is close to chump change. The military burns through about $10 billion a month in Iraq. By Feldstein’s own calculations, between the consumer being wiped out by the housing collapse and stock market bust and the construction fall-off due to housing’s declne, the U.S. economy is likely to suffer annual demand destruction on the order of $600 billion, or slightly more than 3 percent of GDP. Sure, you can talk about increasing defense spending by hundreds of billions of dollars to replace consumer demand, but in reality, there just aren’t many places to spend that money, at least not in the short term.

http://www.dodbuzz.com/2009/02/05/defense-spending-boosts-the-economy-data-says-not-so-much/

Hmmm. So the people who actually do the military spending do not expect it to jump start the economy, but a whole bunch of conservatives want to increase war funding anyway. This bring me back to the question in the introduction.

Why?

III. War Spending: Robbing the People to Enrich a Few



Military spending is, by its very nature, ideal for those who favor an oligarchy, because it enriches a few businesses (and the folks who own and manage them), creates a handful of relatively high paying jobs in a few parts of the country---while reducing the federal tax money that might otherwise be spent in a more fair and equitable way to improve the lives of all citizens. If your goal is to get rich quick and keep the rest of America poor and kneeling at your feet, you want to see lots of military spending.

In the 1960s, in his book Input-Output Economics Wassily Leontief speculated on the results of redirecting federal money spent on the military. In Chapter 10, “The Economic Impact—Industrial and Regional---of an Arms Cut” he concludes that a shift in federal spending away from the military would result in a loss of jobs in some states and an increase in jobs in others. Specifically, California would stand to lose more jobs than any other state, followed by the southwestern states, including Texas, and southern states including Alabama, Georgia and Florida. In contrast, Midwestern and New England states would see an increase in jobs. This is because a few industries would have less work if military spending were cut, but many industries would see an increase in production if that same money were spent on something else.

http://books.google.com/books?id=hBDEXblq6HsC&pg=PA204&lpg=PA204&dq=The+economic+effects+of+disarmament+leontief&source=bl&ots=9hUWJMbR8N&sig=W1mcXpZIR6pVbMf8Us_sf9Xaf0M&hl=en&ei=St31SoGECoTU8Qb9qMzzCQ&sa=X&oi=book_result&ct=result&resnum=1&ved=0CA0Q6AEwAA#v=onepage&q=&f=false

I especially like this part.

An unemployment rate of 5.5% commonly is interpreted as a sign of serious malfunctioning of our economic system.

Nowadays, experts talk about how strong our economy is even as unemployment rates rise over 10%. Talk about diminished expectations!

While the relative economic impact of reduced military expenditures on various states and industries may have changed since 1965, the general principle still applies. Military spending is very good for a few parts of the country and a few industries. The folks who benefit from this type of spending have a financial interest in seeing that the U.S. does not cut the money it invests in war.

In 2003, Seymour Melman spelled it out even more clearly in “How George Bush, His Congress and Pentagon are Looting Our Cities, Robbing Our People and Stealing from Our Children”. He gives a list of the sums needed to accomplish various goals, such as the cost to fix our aging roads and bridges ($42 billion) and expand Medicare to everyone in the U.S. ($41 billion) and then shows how quickly the Pentagon is able to spend that money on new weapons and equipment. Consider the relative value to society of universal health care---which will save millions of lives and prevent disability and increase worker productivity---versus the non benefit of a new military helicopter that may never even get used. In the first case everyone gains. In the second, Bell Helicopter and a few industries which supply them with goods will get rich.

http://globalmakeover.com/sites/economicreconstruction.com/static/SeymourMelman/archive/war/looting_our_cities.pdf

In another essay from 2003 “In the Grip of a Permanent War Economy,” Melman writes about the economic deterioration of the United States brought about by over fifty years of intensive military spending. Capital and innovation have been diverted towards war, while the production of nonmilitary goods has been outsourced to other countries, resulting in a loss of jobs and wealth for the average U.S. citizen. Meanwhile, vast sums are concentrated into the hands of a few who participate in the Military Industrial Complex. He credits rising unemployment to this misappropriation of federal funds and its negative impact on the U.S. economy. The economic prosperity of Japan and Germany are a direct result of their relative low levels of war spending since WWII.

The Permanent War Economy of the United States has endured since the end
of World War II in 1945. Since then the U.S. has been at war- somewhere – every
year: in Korea, Nicaragua, Vietnam, the Balkans, Afghanistan – all this to the
accompaniment of shorter military forays in Africa, Chile, Grenada, Panama.

So it should come as no surprise that there is no public “space” for dialogue
on how to improve the quality of our lives. Such topics are subordinate to “how to
make war”. Congress under both Republican and Democrat control has voted the
same war priorities into the federal budget.

http://globalmakeover.com/sites/economicreconstruction.com/static/SeymourMelman/archive/war/in_the_grip_of_permanent_war_economy.pdf

So true. Talk about how we need to immunize more kids and you are treated as a freak, a member of a radical fringe by the corporate media. More dangerous than Al Qaeda. Say we need to throw $50 billion at a new submarine, and you are a patriot.

Speaking about patriots and military spending, once upon a time, back when the Founders of Our Country were battling King George and Great Britain, they understood the real use of war spending. Rather than protecting the people, it was meant to enslave them. In The Rights of Man Thomas Paine asks why the nations of Europe did not follow through with a proposal to end war made by Henry IV of France. He concludes:

Whatever is the cause of taxes to a Nation, becomes also the means of revenue to Government. Every war terminates with an addition of taxes, and consequently with an addition of revenue; and in any event of war, in the manner they are now commenced and concluded, the power and interest of Governments are increased. War, therefore, from its productiveness, as it easily furnishes the pretence of necessity for taxes and appointments to places and offices, becomes a principal part of the system of old Governments; and to establish any mode to abolish war, however advantageous it might be to Nations, would be to take from such Government the most lucrative of its branches. The frivolous matters upon which war is made, show the disposition and avidity of Governments to uphold the system of war, and betray the motives upon which they act.

http://www.ushistory.org/Paine/rights/singlehtml.htm

Two hundred years later, Melman said much the same thing:

Wherever a military economy operates as a durable entity, that economy has a cadre of state managers who enjoy unique power and privilege within their respective states, and that power is linked to the ongoing operation and expansion of the military-serving industrial and allied enterprise.

http://globalmakeover.com/sites/economicreconstruction.com/static/SeymourMelman/archive/disarm/missinglink.pdf


IV. All We Are Saying is Give (a) Peace(time Economy) a Chance



In their 2007 paper, The U.S. Employment Effects of Military and Domestic Spending Priorities, Robert Pollin and Heidi Garrett-Peltier study the effects of war spending versus other types of federal spending on the economy, particularly on jobs. They compare spending on education, health care, mass transit, home improvement construction, tax cuts and the military to see how they rate in terms of job production and overall economic benefit using the input-output method of Leontief. Their conclusions may surprise you.

Of the six types of spending considered, only tax cuts do a worse job of creating jobs than military spending. Education spending is the best bet for your money if you want to increase the number of people making a real living wage. Spend more on health care, mass transit and home improvement and you will create jobs that do not pay as well as in the education sector----but they still generate more money for the economy than the relatively small number of high paying defense jobs and the service industry minimum wage jobs that you get with tax cuts.

http://www.ips-dc.org/reports/071001-jobcreation.pdf


Pop quiz. Which political group is always demanding tax cuts to stimulate the economy? Which one claims that an increase in “entitlements” ( you know, health care for your kids, early education programs, Social Security) will bankrupt the country, but military spending can never hurt you? Hint, here is the Heritage Foundation from 1982 telling us that the way to increase employment is to cut taxes on the rich and eliminate or tax unemployment benefits.

http://www.heritage.org/Research/Labor/bg222.cfm

Great thinking---if you drive a Mercedes and want to hire someone at minimum wage to wash it daily. Or if you need underpaid people to cut your grass, do your laundry and wipe your (over privileged ) butt after you take a dump on the American working class.

And here is the Heritage Foundation from this year, explaining that when they talked about wanting to decrease the size of the federal government and deficit, they were not talking about cutting war spending.

http://blog.heritage.org/2009/03/09/morning-bell-cutting-defense-is-no-solution-to-economic-woes/

If you are a crypto-fascist of the Mussolini school who believes that the government exists to make the rich wealthier and bust unions, then tax cuts and war funding are you keys to increased wealth disparity.

If you are an elected leader who actually cares about the people who sent you to Washington, then you ought to be thinking of ways to redirect some of those military billions towards education. Since we need good health in order to fully benefit from educational programs, you should also be thinking of ways to improve the public health. Universal access to preventive care is one way. Improving the environment by building mass transit and taking cars off the road is another. Cutting down on fossil fuel use by making our homes more efficient will also give healthier air, so our kids spend less time at home having asthma attacks and more time in school.


V.Books, Not Bombs: If You Don’t Believe Me, Then Will You Believe Alan Greenspan?

Alan Greenspan understands the importance of education spending to help the economy grow. Here is his speech to the Federal Reserve Board in 2000.

Certainly, if we are to remain preeminent in transforming knowledge into economic value, the U.S. system of higher education must remain the world's leader in generating scientific and technological breakthroughs and in preparing workers to meet the evolving demands for skilled labor. With two-thirds of our high school graduates now enrolling in college and an increasing proportion of adult workers seeking opportunities for retooling, our institutions of higher learning increasingly bear an important responsibility for ensuring that our society is prepared for the demands of rapid economic change. Equally critical to our investment in human capital is the quality of education in our elementary and secondary schools. As you know, the results of international comparisons of student achievement in mathematics and science, which indicated that performance of U.S. twelfth-grade students fell short of their peers in other countries, heightened the debate about the quality of education below the college level. To be sure, substantial reforms in math and science education have been under way for some time, and I am encouraged that policymakers, educators, and the business community recognize the significant contribution that a stronger elementary and secondary education system will make in boosting the potential productivity of new generations of workers. I hope that we will see that the efforts to date have paid off in raising the achievement of U.S. students when the results of the 1998-99 international comparisons for eighth graders are published.

http://www.federalreserve.gov/boarddocs/speeches/2000/20000711.htm

Did Bush and the Republican Congress follow Greenspan’s advice? Hell no! These were the same guys whining about how 4% unemployment was harmful to the economy. They were not about to do anything that might put more people to work (even as they increased the need for taxpaying workers by raising federal spending to record levels).

From 2006, a list of things the “Do Nothing” Republicans did not do. Right at the top of the list:

Failed to Adequately Fund Education
Failed to Make College Affordable, Raided Federal Student Aid Instead
Failed to Help Katrina Students Get Back to School
Failed to Bolster Early Childhood Learning Opportunities

http://edlabor.house.gov/publications/DoNothing.pdf

Seems to me that the GOP with their all bombs, no textbook attitude towards running the country are the main reason we are in the mess we are now.

But you know, we should not need economists to tell us this. Anyone remember why the Soviet Union fell? They bankrupted themselves on military spending during the Afghanistan War. War is never good for the economy. It is only good for the pocketbooks of the merchants of death---and for those who want to see the average American reduced to a state of serfdom. Al Qaeda does not want us to invest our money sensibly in education and health care. No, Bin Laden wants us to follow in the footsteps of the U.S.S.R. and waste our resources on war.

[D-Lee]

1. Excellent post! The closing paragraph is great ... nt

[D-Lee]

2. And here is the NYTimes link that shows how close we are to the USSR situation you noted

http://www.nytimes.com/2009/11/08/opinion/08sun1.html?_r=1&th&emc=th

The link is to today's New York Times editorial on joblessnesses in the USA today.

From anecdotal stories about the lack of an ability to find jobs for the 50-year-old-plus, the similarity to the situation in the post-Communistic USSR and it's economic collapse is striking ...

So far, looks like Bush did the same for the USA that Regan did for the USSR.

Very depressing but important to acknowledge.

[hfojvt]

3. I am not sure if you can say that, this close to Armistice Day

We are all "rah rah" for the soldiers now. They "serve their country" doncha know, unlike the rest of us workers and taxpayers who just serve ourselves and cannot possibly get killed or injured either at work or driving to and from work. Plus, unlike all those majors and lt. colonels who are unselfishly serving their country, we get paid for our jobs.

But here's a kick anyway.

[LWolf]

4. Gold nails the obvious

that America will not acknowledge.

[clear eye]

5. Thanks for the tutorial.

K & R.

[malaise]

6. Bookmarked for a later read

Looks good.