Say you run a business in a bad neighborhood. You’ve been paying a security company to keep your employees and property safe. You’re deeply in debt. Now the neighborhood has gotten better. You don’t need as much security anymore – so you plan to cut back. The security service says if you do that, some guards could lose their jobs. It needs you to keep spending what you have so they can stay employed. is this a good argument for you to keep paying what you always have? Of course not. Yet that’s the case being made by politicians across the nation about defense spending and sequestration. We as a nation need to realize that military spending and power is not needed nearly as much these days and should be cut and transferred for the better of the economy and the overall populous.
First let me settle why reducing the enormous US military budget—which by the way is more than double the combined levels of military spending by China, the United Kingdom, France, Germany and Russia, would boost economy . Thanks to the winding down of combat activities in Iraq and Afghanistan and to Washington’s obsession with tamping down the federal deficits that have arisen from the Great Recession this subject is more advocated than ever. Many politicians’ main argument against sequestration is that cutting military spending would result in an enormous amount of job loss. However, the crucial question is not how many jobs are created by spending one the military , but whether spending that money creates more or fewer jobs when compared with spending money on alternative public purposes, such as education, healthcare and the green economy—or even having consumers spend that same amount of money in any way they choose. When compared with these alternative uses, spending on the military is a poor source of job creation. According to a 2012 study conducted by Georgia University, $1 billion in spending on the military will generate about 11,200 jobs within the US economy. That same $1 billion would create 16,800 jobs through clean energy investments, 17,200 jobs within the healthcare sector or 26,700 jobs through support of education. That is, investments in clean energy, healthcare and education will produce between 50 and 140 percent more jobs than if the same money were spent by the Pentagon. Just giving the money to households to consume as they choose would generate 15,100 jobs, 35 percent more than military spending.
What this country needs now is new industrial policies, a January New York Times article presented the view that the most serious negative economic consequence of the military budget cuts would not be entirely on job opportunities but on the economy’s capacity to sustain a successful high-technology growth path as well. The Pentagon’s achievements in the Internet, jet aviation and other transformational technologies from inception to commercial success are indeed significant. However, given the massive resources the military has devoted to technology development, should we expect anything less? Since the end of World War II, the Pentagon has spent more money on research and development than any other entity on the face of the earth. For 2011 the Pentagon’s R&D budget was about $81 billion. This was more than half of federal spending on R&D and fully 20 percent of all R&D spending—public and private—in the economy. Yet even these R&D spending figures understate the scope of the Pentagon’s investments in technology development. This is because the key factor in the success of the program has not been R&D spending by itself. Equally important has been the way the Pentagon’s procurement policies create and sustain huge guaranteed markets for the products emerging from its R&D programs. This is the main theme of the late Vernon Ruttan’s book Is War Necessary for Economic Growth? Ruttan’s answer to that question is that war is not necessary for economic growth but that industrial policies based within the Pentagon have been a
