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The Destructive Economic Impact of Military Spending When Reducing Debt with Unemployment High


By Robert Naiman for MIC50.org

Here's how I want to inspire you. I claim that reality turned an important corner in the United States, brightening prospects for people who want to cut the military budget when Congress passed the Budget Control Act. And many people in America who sympathize with us and want to cut the military budget don't know yet that reality just turned this corner, or at least they aren't yet acting like they know it. So this means that we have an opportunity to seize, if we can just tell people about this opportunity, explain it to them, and mobilize them around it.

If you look at polls, when they ask people, what do you think should happen with the federal budget, that would seem to indicate that we have a lot of friends. The majority of Americans, when you ask them, what do you think about cutting Social Security, the percentage who want to do that is miniscule. And then you ask them, what do you think about raising taxes on the rich? And the response is: "Yay!!!!!" And then you ask, what do you think about cutting the military budget? And the response is: "Yay!!!!!" So that's public opinion, according to polls. The question is translating that public opinion into action in Washington. Because if you took a poll of Washington lobbyists, you'd get a different result. So that's the dynamic that we face: public opinion against the lobbyists, and how do we make public opinion win this debate.

As long as I can remember, it's been a Holy Grail of progressives in the United States to try to cut the military budget. And now we have all these new friends. But America doesn't realize that reality just turned this corner with passage of the Budget Control Act. And if you look around - as I do, I assume many of you do - Huffington Post, Common Dreams, Truthout - what are left-liberals saying about politics in America right now? There aren't a lot of people talking about cutting the military budget. There isn't a big buzz around this right now. Which is really kind of shocking, when you think that for any group of people like us - as I look around this room, conversations last night - a lot of us have been at this for a while - John Heuer was talking yesterday about the opposition to Reagan's wars in Central America in the 1980s, which many of us were involved in - so there's a group of people, a lot of people around the United States, all of our adult lives, something that we always wanted to do was to cut the military budget.

I remember that as a college student in the early 1980s, just starting to get active in advocacy for social justice, there was a poster which I'm sure many of you have seen some version of, where there's this beautiful picture of children playing on a playground in a schoolyard, and the caption is: "It will be a great day when our schools have all the money they need, and the Air Force has to hold a bake sale to buy a bomber." And this poster I think really encapsulates how a lot of us view the question of the federal budget. So for as long as we can remember, there's this Holy Grail we've been searching for.

And now reality has turned this corner, where Congress is talking about significant cuts to projected military spending over the next ten years. And so you might think, that all these people around the United States, their whole lives they've been looking forward to the possibility of significant cuts to the military budget, that there would be a reaction, a groundswell: "Yay! At long last! Do it now!" But we're not seeing it. And the clock is ticking. Because by Thanksgiving, the Joint Select Committee on Deficit Reduction - the Supercommittee - is supposed to come up with a proposal for $1.2 trillion in reduced government spending over ten years. And the question of the day is how much of that $1.2 trillion is going to come out of the projected military budget. And hundreds of billions of dollars of cuts in projected military spending are on the table.

So you would think that people like us would be like: "Holy cow! Pour on Washington! Demand it now!" All our lives we've been saying: cut the military budget, cut the military budget. But right now there's a real possibility that hasn't existed before. If you look since World War II, there's been a few times - at the end of Vietnam, there was a drawdown, at the end of the Cold War, there was a drawdown in military spending. Since 2000, military spending has been going up and up and up, now we have a possibility for a drawdown in military spending. You'd think there would be a tea party-like clamor for cuts in military spending. But we're not really seeing that. The only clamor that we're seeing in the press is the clamor on the other side - the clamor of the military contractors, going to Washington this week with their "Second to None" campaign, that's the clamor that's being reported.

This situation should be setting us on fire.

It's certainly true that Citizens United was a horrible decision and it's certainly true that the disproportionate political power of corporations is a horrible thing - corporations have all this money to spend on campaigns and what amounts to legalized bribery for Members of Congress.

But there's another side to the story, which is that much of what these military contractors are doing is simply First Amendment political activity of talking to Congress, and our people aren't mobilized, at least, not as much as we could be and as we should be.

So this is the context in which I want to talk about the topic of the impact of military spending on our economy: the context is that the Supercommittee is supposed to come up with $1.2 trillion in reduced government debt over ten years by Thanksgiving - an opportunity for hundreds of billions of dollars of that to come from projected military spending. In fact, a trillion dollars in reduced military spending over ten years is on the table. If you look at the way that the first round of the debt agreement is being characterized, it's being characterized as including a reduction of $350 billion in projected military spending over ten years. The Administration claims, and the press is reporting, that the Administration and Congress have already agreed to reduced military spending by $350 billion over ten years from what was previously projected. Now, we don't have that set in stone. There's no guarantee that $350 billion will be cut from projected military spending, a future Congress can do whatever it wants. But that's become a baseline in the debate, that assumption, so that even Republican Members of Congress who oppose further cuts in military spending are using this as a baseline and saying, ok, $350 billion, but no more. We won't tolerate any more than $350 billion.

On the other hand, you know that under the Budget Control Act, if this Supercommittee doesn't come up with $1.2 trillion in reduced government debt over ten years, or if the proposal that they come up with isn't approved by Congress by December, then that will trigger $1.2 trillion in automatic cuts over ten years. And under the Budget Control Act, half of that $1.2 trillion in automatic cuts has to come from the military. So we have a scenario under the Budget Control Act, a scenario in which the Supercommittee doesn't reach a deal, or Congress doesn't approve the deal, where the military budget will be cut by a trillion dollars from the previously projected path over ten years. And that would take us back to what, at an annual level, what military spending was in 2007. So this is not - you remember that Obama spokesman who said, essentially referring to the people in this room, these people want to abolish the Pentagon. So let's be clear. This is not abolishing the Pentagon. But it would be a significant cut from the previous growth path. It would be a real cut. It would be actually reducing spending something like 15% over the period. It would be like the drawdowns after Vietnam and after the end of the Cold War. It would be a real drawdown in military spending. And it would have real consequences, and it would be meaningful, in terms of a positive impact on the domestic economy that would be felt by the majority.

So this is a possibility. Hundreds of billions of dollars, even a trillion. And of course, if you ask me: what is just? What should we aspire to? That's another story. But it's important for Americans to know, it's important for all of us to know, that this is on the table of debate in Washington right now. One trillion dollars of cuts in projected military spending over ten years is on the table. In the same way that a public option in health care was on the table in discussion and debate, a trillion dollars in cuts in military spending is on the table for debate.

This is realistic, this is practical, this is pragmatic, this could happen in the next couple of months. This is a winnable fight, in the next few months. A trillion dollars in cuts to projected military spending over ten years.

Now let me tell you why that would be a meaningful victory for the majority of Americans in terms of the impact of military spending on the economy.

In 2007 and 2009, economists from the University of Massachusetts at Amherst did a study of the comparative impact of military spending on the economy. Remember that this was a time when the economy was imploding because of the housing and financial crisis and people were talking about stimulus and how we need to stimulate the economy so it made sense to say, if there's going to be a stimulus package, how should that money be spent?

And the conclusion of that study was that among the ways that stimulus money might be spent, military spending is the least efficient, has the least impact, the least bang for the buck, among ways that the government could spend money. Including, not only construction, health care, education and mass transit, but even tax cuts for personal consumption create more jobs than military spending. Ideally, we progressives would like a new Works Progress Administration, we want green jobs, But even tax cuts to stimulate personal consumption - like is the main plank of the jobs bill that President Obama just announced, extending the payroll tax holiday, so that's tax cuts to stimulate personal consumption - that creates more jobs than military spending.

And this is an absolutely essential key point for people to understand.

Of course it's the case that military spending supports employment. Of course it's the case that if you say we're going to build fighter plans, and we're going to contract with Boeing, then some workers in Seattle will have jobs. But every form of government spending creates jobs, and military spending is the least efficient, it's the least bang for the buck.     

This is incredibly important now, newly, in the context of the Budget Control Act. Because military Keynesianism has a logic, and that was alluded to in the last presentation. Because while it's true that military spending is the least efficient in creating jobs, it still might make sense if you were under a political constraint where somebody beat you up and handcuffed you and said you're not allowed to do anything else, then it might make sense. And in a sense that has been true historically in the United States, because of the politics, because of the distribution of power, it was as if somebody passed a law that said, you're not allowed to do these other things, you're not allowed to talk about these other things. So in that context, it makes sense to use military spending to stimulate the economy, if you're not allowed to do anything else.

So when people talk about what happened in the 1930s in the United States - you certainly see a lot of analogies today, including the fact that at the beginning, Roosevelt's team came on strong with stimulus, then there was this blowback, about omigod government debt, and then in 1936-37 they pulled back and then there was another recession, as a result of pulling back on the stimulus. And then there was a spike in production as a result not of the US going to war per se but as a result of the US beginning to participate economically in the war, by arming Western Europe. So that story of how World War II pulled the U.S. out of the Depression - it has some truth. The truth is that the politics of the United States - the demands of rich and powerful people against government spending - were an obstruction to the stimulus that was needed, and the demands of supporting the war in Europe allowed getting around that political obstruction.

But now we are in a different position, because of the Budget Control Act. Because now by agreeing, the President and Congress, that there is a goal of $1.2 trillion in cuts over ten years, some of which may come from the military, now everything has been put on the same table. Every form of government spending over the next ten years - with the partial exception of the wars, I'll come to that - has been put on the table. The base Pentagon budget - the non-war budget - is right in the middle of the table right now. Every dollar that isn't cut from military spending in the plan that the Supercommittee presents to Congress is a dollar that's going to come from somewhere else, probably domestic cuts. Maybe cuts to Social Security, maybe cuts in Medicare benefits. So now it's one-for-one. We're not in the situation where you can do military spending, deficit spending and that's the only thing you can do. We're in a situation where everything's been put on the same table, and it's one-for-one. If you can cut a military dollar, that protects a domestic dollar. If you fail to cut a military dollar, that exposes a domestic dollar. So now the fact that military spending is the least efficient means of creating jobs is critical. Because in the University of Massachusetts study, a billion dollars put into the military budget created 8000 jobs. A billion dollars put into domestic spending, in the least efficient of those alternatives, tax cuts for personal consumption, that created 10,000 jobs. So that means that if you move a billion dollars from the domestic budget to the military budget, you destroy 2000 jobs. If you move a billion dollars from the military budget to the domestic budget, you create 2000 jobs. So that means that if you move $200 billion from the military budget to the domestic budget, you create 400,000 jobs.

If, for example, we could end the war in Iraq this year, like we agreed, if we pull all of our troops out of Iraq this year, like we agreed, by December. If we had zero troops in Afghanistan after 2014, like has been announced, all foreign combat troops are supposed to leave Afghanistan by 2014. If we did that, instead of what the Pentagon wants to do, to have 10,000 U.S. troops in Iraq indefinitely, and have 25,000 troops or more in Afghanistan indefinitely. If you compare those two worlds, a low, cautious, conservative, certain to be underestimate of that difference is $200 billion, what we would save by ending the wars just when we agreed. Not today, not tomorrow, but when we already said. End the wars when we already said, save $200 billion against what the Pentagon wants to do. And if we don't do that, and the money comes out of domestic spending instead, 400,000 jobs destroyed.

What's 400,000 jobs? The U.S. labor force is 150 million people. So if you could put an additional 400,000 Americans to work today, that would reduce the measured unemployment rate from what it is today, 9.1%, to 8.8%. That's not solving the unemployment problem but that's a significant move. Compare this to the jobs bill that the President just announced: private economists estimated that if the whole package were approved by Congress, that would reduce the unemployment rate by one percentage point. So this is of the order of magnitude of the impact of the proposal being made in the President's jobs bill.

And that's just the $200 billion. What if we could take $1.2 trillion? What if we could take a trillion dollar cut out of the base Pentagon budget over ten years, and then we got $200 billion out of the war budget over ten years. Then you have six times the impact. So that would be analogous to reducing the measured unemployment rate by 1.8 percentage points. So that would be like the unemployment rate being 7.3%, instead of 9.1%. These are real impacts. This is a real impact that we could have in the United States in this battle that's happening between now and Thanksgiving, that would help put Americans back to work.

So we face, I think, a kind of emergency, those of us who want to cut the military budget. Because we have this historic opportunity, and America doesn't know it. People who are the constituency of this opportunity don't know it. The other side is highly mobilized. They know exactly what's at stake. Stocks of military contractors have fallen on the expectation of military cuts. They are out in force. Our people are not out in force. We need to mobilize our people right now, across the United States, to hammer Congress, like the Tea Party, make their phones ring off the hook, dog them every time they show their face in public, cut the military budget now, make the Supercommittee cut the military budget and end the wars as part of the deal to reduce the U.S. debt.

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