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Defense Spending as Economic Stimulus?

By Greg Grant Monday, January 26th, 2009 6:54 pm
Posted in Policy

Tomorrow morning, Defense Secretary Robert Gates goes before the Senate Armed Services Committee to discuss “Challenges facing the Defense Department.” Let’s hope the hearing doesn’t degenerate into a debate about the Iraq withdrawal timeline. While that’s certainly an important topic, DOD faces real challenges, specifically on future strategy, force structure, weapons programs and budget, and it would be really nice to hear Gates’ lay out his ideas on how he hopes to address them.

Long time defense analyst and Center for Defense Information director, Winslow Wheeler, emailed a helpful list of some issues and questions the senators should discuss with Gates. In commentary that can be found here, Wheeler pushes back on the idea that defense spending can provide economic stimulus to the American economy. Tomorrow (Jan. 27) at 3:00 p.m. on sister site Defense Tech, Wheeler will be a guest for a live online interview. Be sure and check in. Some of Wheeler’s commentary:

Many questions are sure to be prefaced with statements asserting US armed forces as “the best in the world, if not in history.” Such statements are little more than political fluff and steadfastly ignore the deterioration we have been experiencing. A more meaningful question is, how can we reverse the trends that over both Republican and Democratic administrations have made our forces smaller, older, and — most importantly — less effective at increasing cost?

Unavoidable questions that Gates will face will involve, not any problem — let alone reform — but instead the notion that spending more on the defense budget will help stimulate the economy. Heavily populated with habitual porkers, the committee is sure to witness Saxby Chambliss (R-GA) to seek more F-22s for Georgia, Susan Collins (R — ME) to look to fortify shipbuilding for Maine, and several others as well. Chambliss’ F-22 and Collins’ DDG-1000 do not help our defenses; they degrade them. The same counter-intuitive logic is true of economic stimulus. Spending more on complexities like the F-22 and DDG-1000 will not provide the economic stimulus sought. In fact, cutting, not expanding, the defense budget can result in real stimulus — but only if Congress does it right.
As the economic news darkens in the United States, the ideas for stimulating new jobs get worse. A sure-fire way to advance deeper into recession is now being spread around: spend even more on the Department of Defense (DoD). Doing that will not generate new jobs effectively and it will perpetuate serious problems in the Pentagon. The newly inaugurated President Barack Obama would be well advised to go in precisely the opposite direction.

For those who argue that defense spending is in fact simulative to the larger economy, I want to hear why the sharp increase in defense investment spending since 9–11 has not had a more noticeable impact on U.S. GDP.

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	pfcem January 26th, 2009 at 8:33 pm Government spending in not simulative PERIOD. No matter what the spending is on. Tax cuts (people having more of their own money to spend on the things that drive our economy) & stability (investors confident that the rules are’t going to dramatically change making their investments worthless) in simulative. What government spending on things like defense does do is help to MAINTAIN (most importantly JOBS & industry) that we already have & does so spending money on things the government SHOULD be spending money on reguardless. It is absurd to think that TRILLIONS of dollars of NEW government spending is a good thing & on the other had think that tens of billions in defense CUTS is good &/or going to amount to anything other than a weaker nation LESS likely to be capable of fulfilling its worldwide interests/obligations & MORE likely to be attacked.
	DC2 Jennings January 26th, 2009 at 9:09 pm Here is a question: where do you buy your t-shirts from and where are they made? How about your jeans? Television? This is the true measure of where we are at as a nation. Most of our American made cars aren’t even made in America. So people thinking that we can stimulate the economy by simply paying less in taxes are offbase. All you are doing is funneling money to China, Malaysia, Phillipines, or some other 3rd world country. Yes you paid Best Buy or Walmart for services rendered. But if America isn’t producing anything all we have is service jobs to service ourselves. In my opinion that is one of the reasons we are in this recession right now. So when all of the credit ran out for those that have service jobs the bottom fell out. Yet where are the good paying jobs these days? Aerospace, defense, and all of the other technology sectors of manufacturing. Since big American companies like to outsource production to cheaper labor countries (Microsoft, Dell, etc.) this is even drying up. That leaves us with defense spending. Where if we don’t buy American we actually get pissed off about it. You think things are bad now, what if we hadn’t been spending the hundreds of billions of dollars in additional funding over the past 6 years with the military? What if we hadn’t added additional Soldiers, Sailors, Airmen, and Marines to the ranks? Giving me more money in my paycheck so that I can go buy a Japanese made television from Best Buy does not help our economy. It helps Japan’s economy. That is one of the reasons our recession has gone global. We stopped buying what the world had to offer. We need to create more high paying, high tech manufacturing jobs in this great nation. We don’t need to be the cheapest at what we do, we need to be the best. That is why Mercedes can build their German (and yes sometimes American) made cars at a higher sell price than Hyundai. So what are we the best at? You guessed it, developing things that kill people in the most efficient way possible. Here is my final question: if this is our forte, then why aren’t we selling more of this stuff to more of the countries around the world that can afford it? If Japan wants to buy F-22s why don’t we sell them? If China wants to build an aircraft carrier why don’t we build it for them? DC2
	DC2 Jennings January 26th, 2009 at 9:40 pm I would like to offer a caveat: We should not spend or go into debt for the sake of spending money. That means programs like ARH remain dead because the money spent does not equal the payout. In the long run our military will be stronger, recapitilazed, and more advanced. BTW, where were these debt boo birds when we were spending our kid’s money for “our security” the past 6 years? The first time in our history we have been at war and cut taxes, while still showing a deficit each year. DC2
	bambooviper January 27th, 2009 at 3:19 am I agree with the tax cuts as long as it isn’t just another way of letting the super rich keep all the money. Last time one and a half percent shared the same money the rest of us split, I don’t know about you but 80 dollars a day to drive to work ate mine up fast, I was working 7 days a week or I would have never made it. As far as defence spending, the last 8 years it went to Haliburton,and subs,and a lot they say they don’t know where it went,but if you look at the graft on past years national debt, you begain to see a tred starting in the 60s, look at the graft and who was in office. Just my thoughts
	Tenn Slim January 27th, 2009 at 9:27 am Mr Grant 1. Maintenance of existing programs IE F22 F35 and the Maine DDG… will KEEP folks employed. 2. Degrading or eliminating funds to the existing programs will create unemployment, add to the existing unemployment statistics and mean more monies must be spent to aid these laid off folks. 3. DOD funds are for ever being axed, upgraded and tossed around as political footballs, all at the expense of the DOD folks. This is a bad state of affairs, but reality. 4. Pres Obama, IAW the Center for American Progress white papers, written over 2 years ago, is going to cut the DOD budget by some 25 %, question is, where and who gets the ax. 5. DOD funding consisitently keeps some 50 states Small Business folks employed, IE the Vendors of the DOD Industry. THese folks will also suffer, if the ax falls on the Main Budget. We, as bloggers, and Net junkies, have the option and pleasure to watch the idiocy of these Guvmnt Committees, at our leisure. Therefore, I would offer the Net as a source of true data, not DOD White Papers. end
	Tenn Slim January 27th, 2009 at 9:31 am “Here is my final question: if this is our forte, then why aren’t we selling more of this stuff to more of the countries around the world that can afford it? If Japan wants to buy F-22s why don’t we sell them? If China wants to build an aircraft carrier why don’t we build it for them?” Answer: Each DOD program has an Allied Program, whereby various nations contribute, build, buy and participate in the program. The projects and programs must have this element to even get funding to start. end
	Tenn Slim January 27th, 2009 at 9:36 am “I agree with the tax cuts as long as it isn’t just another way of letting the super rich keep all the money“ Comment: Just who are these super rich.? I know of one that bought the last election Mr. George Soros. A hedge fund operator par excellance. As to them, who ever they may be, keeping all the money, remember, if the various high rollers in the last stock market fiasco had not dealt their hand, then the lower level, of whom there are a lot!!, would not have gotten thier cuts. The pie is large, it is our Conservative Opportunity to participate, to cut out our share and more, if we want. Capitalism is a lot like watching how sausage is made, gross, unclean, nasty but tasty when one drives off in a Cadillac. end
	DC2 Jennings January 27th, 2009 at 11:07 am Tenn Slim, Not all DoD programs have the support of allied nations. In fact, I can only think of the JSF as such an animal. Wow, one guy bought the last election? Geez, and I thought the Jews had all the power and money (sarcasm btw). Oh, and I don’t own a Caddy so I guess I am part of the ground meat stuffed inside the pig’s intestine. DC2
	OlSarge January 27th, 2009 at 11:40 am Guess What? We have many High-TEC good paying jobs in America but due to the lack of American student interest in Science and Engineering, especially Electronic and Computer Science we’ve had to turn to other nations with an abundance of SW Engineers and EE’s! Mainly, Ireland, India and China! Our University Applied Physcis Labs are fully of foreign students getting that best that we have to offer and profitting from it. Mean while we bicker about lost bank and mortgage jobs, manual labor and car dealerhsips. We have been a serious Service Economy for a Generation and no one noticed. Small businesses today mostly are franchises. Truly private businesses occasionally meet with success like Starbucks and Papa Murphy’s. Our Public schools have failed and the people who led them to ruin now populate our Congress and Senate! All people of this nation need to seriously search their souls and see if adhering to any political party is in the best interests of this nation. I will wager that Lassez Faire and me first dominates and that we will see a steady erosion of our moral terpitude and then a death spiral into oblivions joining the great Democracies of History. As illustrated by the fact that our fellow citizens turned a blind eye to the crooks being appointed in our government and the condoning of unethical practices and corruption in the halls of Congress. I am whopping mad and we shouldn’t take it anymore!
	Aliyon January 27th, 2009 at 11:52 am “Just who are these super rich.?“ It has been estimated that in 2001 the top 1% of U.S. households owned about 38% of all wealth, and the top 10% owned about 71%, while the bottom 40% owned only 0.2%. No matter how you slice it thats a pretty small slice of pie. As far as taxes go check this out The federal income tax is a progressive tax and so almost balances perfectly as far as percentage of taxes paid compared to perrcentage of wealth, unfortunately other taxes (e.g. payroll taxes, property taxes, corporate taxes (when cost is past on to consumers), and tolls) shift the burden to the bottom households as they have the least amount of wealth. So the overall tax burden as a percentage of wealth actually falls on the lower 90% not the super rich as they would have you believe. That’s not Capitalism by the way; Capitalism — Capitalism is an economic system in which wealth, and the means of producing wealth, are privately owned and controlled rather than publicly or state-owned and controlled. It’s just a result of the super wealthy in or country over time using the power gained from that wealth to shape the rules in their favor so as to maintain their supremacy.
	mike j January 27th, 2009 at 1:50 pm Imagine we do use defense spending to stimulate the economy, and at the 10 year point we’re now sitting around armed to the teeth, and everyone else who bought our weapons as well. What then?
	DC2 Jennings January 27th, 2009 at 2:43 pm Sarge, Great commentary. It doesn’t matter whether it is Republican or Democrat, they both turned a blind eye to oversight of business. We have checks and balances in government, we should have the same thing in business. Somebody needs to watch these guys to make sure they aren’t creating the situation we are in now. Capitalism is great, as long as the capitalists are monitored. Otherwise business will always focus on their main goal, making money, and nothing else. DC2
	DC2 Jennings January 27th, 2009 at 2:44 pm Mike, We all feel safe knowing that all of us are armed to the teeth. That is the reason the NRA wants to get rid of any gun laws. That is the reason we never had nuclear (nucular as the case may be) war. MAD. DC2
	mike j January 27th, 2009 at 3:26 pm DC2 Jennings– Can’t agree with that. The US and USSR were both fairly rational militarily. When did MAD almost fail? When an irrational third party (Castro) interposed. I think irrationality is the downfall of your idea, although it is basically sensible. We’re also not talking about giving everyone nukes. Conventionally armed nations have gone to war numerous times, and very often over some irrationality that exploited tensions. I think if we go the route of ‘defense stimulus’, we might end up just packing the tinderbox for a new conflagration.
	DC2 Jennings January 27th, 2009 at 4:21 pm mike, Sorry, I was being more sarcastic in my comment than anything (it’s the Gen X in me). I am not saying start a new arms race. I am saying we should recapitalize our entire military. We are flying tankers that are 50 years old. We have fighter planes with pilots who had their father flying the same plane. The system is replete with a need for modernization. That would also include the VA and how veterans are processed for any number of things outside of the medical/disability realm. I am not talking about spending money to add to our existing capacity. I am talking about spending money to replace what we already have. I think we can all agree that 8 years of one baby boomer bending the military over was followed by 8 years of another baby boomer breaking the military’s back. It’s time to fix that. Also understand that I am not saying China should get a Nimitz class carrier. But there is no other country in the world that can build these boats like we can. Why not offer the UK our Virginia subs to replace their Trafalgar class that has had nothing but issues. DC2
	mike j January 27th, 2009 at 5:09 pm DC2– I thought I smelled some sarcasm but y’never know sometimes. At an airshow once I walked up to a B-52 crewman doing PR next to his bird, and asked “So, how much older than you is this thing?” Answer was 12 years. Yes, we need new stuff, no question. What new stuff, that’s the hard part.
	airforcepjt1 January 27th, 2009 at 6:34 pm As an AF Reservist, I’m a bit confused. First we are told that it is too expensive to allow reservists and national guard folks to receive their pensions at age 55. Now, some politicians want to stimulate the economy via military spending. It seems like an easy fit. Ladies and gentlemen, Please revitalize the discussion with Congress.
	old391 January 27th, 2009 at 7:17 pm Well some of you seem to forget what happened when Jimmy Boy cut the military during his term. Inflation, more unemployment and high interest rates. Increase in the DOD budget will create jobs not only in the defense industries but other sectors of the ecomony, something Jimmy Boy did not think of when he was in office. Also we in the defense industry pay a lot in INCOME TAX and SOCIAL SECURITY that the government will lose and they need all the taxes they can collect for Obama wonderful ecomonic plan
	DC2 Jennings January 28th, 2009 at 10:06 am old391, Dude, I was 9 when Carter was voted out. So it is not that I forgot, it is that I don’t even remember it. Think about Obama’s plan this way: it’s three years in Iraq. If you didn’t get up in arms back then please don’t bring up this now. Either way we are talking about the security and short term future of our nation at the expense of our long term health. We just need to understand that we need to make it right when the good times start again. DC2