Can we do without military Keynesianism?

It is interesting how some people who disbelieve in the power of government to do anything about unemployment also believe there is such a thing as “war prosperity.”  During my life I’ve heard many people say that it was World War Two, not the New Deal, that ended the Great Depression.  To the extent that this is true, all it means is that the level of government spending in the 1930s was too modest.

Here’s a quote from Judson Phillips, a Tennessee lawyer who heads Tea Party Nation.

If we decided to build a couple of new carriers, thousands of workers would be hired for the shipyards. Thousands of employees would be hired for the steel mills that would provide the steel for the hull and various sub contractors would hire thousands. Do you know what that means?

It means they would receive paychecks and go out and spend that money. That would help a recovery. That is a shovel ready project!

Increasing spending for the military does a couple of things. It not only not only stimulates the economy, it protects our nation. That is a better investment than say spending money on teaching Chinese prostitutes how to drink responsibly.

via The Economist.

But there are those on the opposite side of the political fence who are just as inconsistent.  Many advocates of economic stimulus programs believe it is possible to make deep reductions in the armed forces and military spending without any adverse effect on employment and the economy generally.

If Judson Phillips favors military spending as a job-creating measure, and opposes spending on infrastructure construction to create jobs, that is inconsistent.  But many members of the Tea Party movement do in fact want to cut military as well as civilian spending.

The Obama administration is more in line with Judson Phillips than some of his fellow Tea Partiers are.  Defense Secretary Leon Panetta has warned against any real cuts in military spending (he favors only a slowing in the rate of growth) and says cuts should be concentrated on discretionary non-military spending as well as Social Security, Medicare and other entitlements.

I do not think the declining U.S. economy can sustain military bases and military operations all over the world.  I think the size and mission of the U.S. armed forces are excessive compared to what is needed for defense of the homeland.  But if the armed forces and military spending were shrunk to what is necessary, and nothing is else changed, this is going to raise the unemployment rate.   We need a change in priorities, not just cuts in spending.

During the 20th century, the U.S. armed forces were an employer of last resort for young men (and more recently young women) from working families and poor families.  When I reported economic news for the Rochester Democrat and Chronicle, military recruiters were a good source of information on the state of the economy.  The worse the economy, the better for recruitment, and vice versa.

An academic study in 2007 concluded that the U.S. military spending was growing at nearly four times the rate of growth of the overall economy.   The authors estimated that the then $600 billion U.S. military budget generated 5 million jobs, in the armed forces and civilian military contractors—many of these highly-paid scientific, engineering and other high tech jobs.  Military research has generated many valuable spinoffs, including the Internet.

The authors argue that there would be a bigger economic payoff if military spending were diverted to health care, education, mass transit, infrastructure repair or energy conservation and renewable energy.  But what would be the effect if military spending were simply cut, and hundreds of thousands, maybe millions, of troopers and civilian workers were thrown onto the job market?

The United States is by far the world’s largest exporter of armaments.  The U.S. arms industry is one of the few U.S. manufacturing industries to generate a large surplus of exports over imports (less so than in the past, however, because of outsourcing of components).  This is made possible by the strong base given by U.S. government purchases of weapons, and pressure on U.S. allies to buy compatible weapons systems.  A big reduction in U.S. military spending could undercut this advantage.

Click on Crunch Time for the Industrial Base for an Air Force magazine article on the future of the U.S. aerospace industry.

Click on America’s hottest export: Arms for a Fortune magazine article on the U.S. arms industry.

Click on U.S. Defense Exports Still Dominate Market for an Aviation Week article on U.S. weapons sales abroad.

Click on The Tyranny of Defense Inc. for a critique of military Keynesianism by Andrew Bacevich, a retired career Army officer who now teaches political science.

Click on Why the US has really gone broke for a 2008 article by the late Chalmers Johnson, who coined the phrase “military Keynesianism.”  Although his criticisms were directed at the George W. Bush administration, the situation he described still exists today.

Click on The U.S. Employment Effects of Military and Domestic Spending Priorities PDF for the academic study of the impact of military spending.

Click on Stimulus thinking: Adventures in tea-party cognitive dissonance for comment on Judson Phillips and the Tea Party in The Economist magazine.

Click on Tea Party wants military spending cut for a different view of Tea Party priorities.

Click on Panetta warns against “doomsday” cuts for the Obama administration’s view of military spending.

There is a parallel problem with U.S. farm subsidies.  The money spent on these subsidies could be better spent elsewhere.  Yet agri-business is another of the few U.S. industries that generates a large surplus of exports over imports.  Without subsidies to keep prices down, U.S. exporters might lose out to other nations.

I don’t have a good answer to any of these problems.  I do have a couple of broad observations.  Our inability as a nation to reduce unemployment or raise wages makes all other problems virtually impossible to address.  If we had a full-employment, high-wage economy, based on growing production of useful goods and services rather than debt and speculation, these problems would be comparatively easy to address.

Tags: MIlitary Keynesianism, Tea Party