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Study: Defense Spending is ‘Weak Job Engine’

DoD Buzz - November 29, 2011, By Philip Ewing

Pentagon and Hill defense advocates have all kinds of numbers about the economic benefits of defense spending, and the potential consequences if it’s cut deeply: More than a million jobs lost. Ten percent unemployment. Key industrial capabilities lost forever.

But a new study out Tuesday says that whatever its impact, the defense budget is not the best way for the government to create jobs.

In fact, authors Robert Pollin and Heidi Garrett-Peltier — of the Political Economy Research Institute at the University of Massachusetts Amherst — conclude that defense spending is not only less effective than other forms of “stimulus,” it’s also less effective than just general consumer spending.

Per the university’s announcement:

As in the previous editions of their study, they find unequivocally that government spending on the military is a far weaker engine of job growth than are investments in clean energy, health care, or education, and is even weaker than spending the same amount on household consumption.

Since mid-2011, the impact of military spending on job creation has been discussed as a component of the broader debate on how to reduce the federal government’s fiscal deficit. This study, “The U.S. Employment Effects of Military and Domestic Spending Priorities: 2011 Update,” clarifies that debate.

Congressional debates on deficit reduction have highlighted the assertion that large cuts in the military budget would produce negative impacts on jobs in the U.S. economy. The Pentagon itself suggested that military cuts in the range of $1 trillion over the next decade would add one percentage point to the U.S. unemployment rate. But whether or not this particular forecast is accurate, the most important question is not the absolute number of jobs that are created by spending a given amount. It is rather whether spending that money on the military creates a greater or lesser number of jobs relative to spending the same amount on alternative public purposes, such as education, health care or a clean-energy economy, or having consumers spend that amount of money any way they choose.

As Pollin and Garrett-Peltier show, in comparison to alternative uses of funds, spending on the military is a poor source of job creation. They find that $1 billion spent on the military will generate about 11,200 jobs. By contrast, spending those funds on alternative purposes would create 15,100 jobs for household consumption, 16,800 jobs for clean energy, 17,200 jobs for healthcare, and 26,700 jobs for education.

Those are total jobs, not those created directly by federal spending. For example, in the case of defense, $1 billion buys 6,800 “direct jobs,” Pollin and Garrett-Peltier write, and the rest are created by the ripple effects. What’s more, the authors say, defense spending tends to benefit mostly high-skill, “high-credential,” workers, whereas the other areas of focus include more opportunities for more types of employees.

The PERI study is interesting — clearly intended as a shot across the bow of the Iron Triangle and an arrow for the quiver of congressional Democrats. Pollin and Garrett-Peltier conclude by writing this: “By addressing social needs in the areas of clean energy, health care and education, we would also create many more job opportunities overall as well as a substantially larger number of good jobs.” See? It’s about Ameliorating Social Needs, which happens to coincidently have the effect of employing people.

Their argument, in other words, is the exact same one made by defense advocates. The Pentagon budget isn’t a jobs program, boosters say — it’s a small fee we must pay in order to Provide for the Common Defense, as stipulated by this old piece of paper called the U.S. Constitution. (Maybe you’ve heard of it.) So defense spending is about Protecting our Freedoms, which happens to coincidently benefit corporate campaign contributors and protect home-district bases, factories and shipyards.

The problem for both sides now is that Washington has ground to a halt. No one can accomplish anything. The capital probably may not be able to ameliorate or provide for anything until at least early 2013 — if then.

 

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The information above is for general awareness only and does not necessarily reflect the views of the Office of Economic Adjustment or the Department of Defense as a whole.