Military Spending: Bang for the Buck?

Military Spending: Bang for the Buck?

Bob Pollin: Military vs Education spending, how many jobs does one billion dollars create -   December 30, 2011
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Robert Pollin is Professor of Economics and founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. His research centers on macroeconomics, conditions for low-wage workers in the U.S. and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the U.S. Most recently, he co-authored the reports Job Opportunities for the Green Economy (June 2008) and Green Recovery(September 2008), exploring the broader economic benefits of large-scale investments in a clean-energy economy in the U.S. He has worked with the United Nations Development Programme and the United Nations Economic Commission on Africa on policies to promote to promote decent employment expansion and poverty reduction in Latin America and sub-Saharan Africa. He has also worked with the Joint Economic Committee of the U.S. Congress and as a member of the Capital Formation Subcouncil of the U.S. Competiveness Policy Council.


Military Spending: Bang for the Buck?PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Washington. The congressional supercommittee having failed to reach an agreement on deficit cutting is now supposed to give rise to triggered cuts in social and military spending, military spending cuts around $60 billion a year starting in 2013 for ten years. If you set aside the underlying assumptions that American needs such a big military, one of the defense of such a budget has been the employment it creates. Well, just how much bang for the buck do you get from military spending? The PERI institute, which a few years ago did a groundbreaking study on all of this, has now updated that work, and now joining us to talk about that is Bob Pollin. He's the codirector of the PERI institute, and he joins us from Amherst, Massachusetts. Thanks for joining us, Bob.

ROBERT POLLIN, CODIRECTOR, PERI INSTITUTE: Thanks very much for having me, Paul.

JAY: So what was the methodology of your study, and what conclusions did you come to?

POLLIN: The data in our study are based directly on statistics gathered by the U.S. Department of Commerce. The U.S. Department of Commerce actually just surveys businesses and says, what do you do to produce what you produce? The inputs are all the materials, all the people, all the energy, all the land, all the buildings, and the outputs are the things you produce, like weapons or a military fighting for us. So that's what we used. It is very straightforward methodology. We have been have heavily criticized by people in the--lobbyists in the defense industry, but there's really no criticism, unless you want to say that what the Department of Commerce is doing is wrong. So that's our methodology.

JAY: Okay. So the military industry will say, do say that they have mostly unionized jobs, mostly high-paid jobs, and as a result, that's good for the economy, and you shouldn't weaken that.

POLLIN: The evidence that we gathered shows some basic things, that--. The military budget is on the order of $700 billion a year. So of course when you spend $700 billion you are going to create a whole lot of jobs. There's just no way around that. So there is nothing--there is no argument against the notion that the military budget creates a lot of jobs. But that's not the relevant question. The relevant question is: if we took the same money, or at least some portion of that money, and spent it on other things, would we get more jobs or fewer jobs relatively speaking? That's the central question that we ask in our study. So in the military, if you spend $1 billion, the evidence shows you get about 11,200 jobs, okay, roughly 11,000 jobs per $1 billion of spending. If you spend the money on the green economy, you get 17,000 jobs--not 11,000; 17,000. So you get about 50 percent more jobs. If you spend the money in education, you get 26,000 jobs, as opposed to 11,000 jobs. So you get two and a half times more jobs spending on education than you do on the military. Now, what about the issue, oh, well, they're high-quality jobs in the military? In fact, you will get more high-quality jobs spending on infrastructure, spending on the green economy, spending it on health care, than you will spending on the military. So you get plenty of jobs for engineers, technicians, jobs in all categories. You just get more of them than spending on the military.

JAY: So I guess it's a bit ironic that some of the people that defend the military spending are the same people that are opposed to any kind of direct government stimulus or government jobs program.

POLLIN: Yeah, that is--one of the interesting things that has come out of this is that the people that [snip] criticize government spending expansion because government can't create any jobs. That's their mantra. However, when it comes to the military, what's their mantra? We can't cut the military, because it creates so many jobs. Well, of course, the military does create jobs. Spending money on anything--public sector, private sector, combined--that will create jobs. The key point here is that spending on the military is a relatively poor source of job creation, both in terms of numbers of jobs and in terms of overall numbers of high-quality jobs.

JAY: So dig into the dynamic or mechanic of this. Why does that happen? For example, if you compare education to military, why do you have almost--I think, almost double the number of jobs created if you compare education to military?

POLLIN: More than double. And the reason--there's no abracadabra here. It's very straightforward. If you spend $1 million on something, how you get a differential number of job creation depends on, number one, the amount of money that you spend on people. If you spend more on people and relatively less on equipment, relatively less on land, buildings, energy, then you'll get more jobs. So it's--the term is labor intensive. When you spend more on education, it's more labor intensive--more of what you do is spent on people. The other factor that is crucial is how much do you spend in the domestic economy versus outside the U.S.? So, clearly, with the military a relatively high proportion is spent outside the U.S., so you create fewer jobs within the U.S., whereas in education, in the green economy, in infrastructure, in health care, a relatively higher proportion is spent in the U.S. And so those two factors, labor-intensity and relative domestic content (the amount spent in the U.S.), will generate more jobs for a given amount of spending.

JAY: Well, if you look at these automatic budget cuts that are being talked about which are not going towards other kinds of spending--they're talking about just directing it towards deficit cutting, so it's--they're not going to take these cuts and put it into the kind of spending you're talking about. But how significant are these triggered cuts?

POLLIN: The news media and the Congress are presenting these as if they're potentially calamitous, but if we're talking about cuts in the range of fifty to sixty billion dollars a year over ten years--so that would be $600 billion over ten years--these are actually pretty small. The Pentagon's budget right now is over $700 billion officially. So we're talking about less than a 10 percent cut. Meanwhile, we also, of course, have ended two wars, Iraq and Afghanistan. The budget for those two wars over the last year was $163 billion. So we're only cutting about one-third the amount that we're spending on those two wars that have ended.

JAY: Well, Afghanistan ain't ended yet.

POLLIN: Okay. Assuming it does end. So the point is that we are actually adding to the amount of military spending going for everything else besides Iraq and Afghanistan with these cuts. This is not a significant cut.

JAY: So what does Defense Secretary Panetta mean when he says this is going to be almost $1 trillion and add 1 percent to the unemployment line?

POLLIN: Well, because they don't have any evidence to back up the 1 percent cut in the unemployment rate. They also--when they talk about that, they don't talk about shifting the spending into something else. They just say, okay, let's take this amount of money, and poof, it goes away. Now, that's true. If you take out money from the economy on anything, military spending or anything else, you take out spending, you have fewer people getting employed. That's why we have an employment crisis now more generally. We need to get more spending into the economy. The point, though, is if you take the money out of the military and you put it into the green economy, you get more jobs. If you put it into education, you get still more jobs. Even--even if you just say, okay, we're going to take the money out of the military and give it back to the--lower taxes and let people spend it on whatever they want, even doing that, you get 35 or so percent more jobs per dollar of expenditure than you would keeping the money with the military.

JAY: So just by actually lowering ordinary people's taxes a little bit and not spending it on military, even that creates more jobs.

POLLIN: Right, because one of the things we also compare in the paper is we just compare the ordinary consumer basket. And we just assume, let's say, put more money into people's hands, let them spend it, as opposed to having the money be with the military, and you're going to get about 14 jobs per $1 million, or 14,000 jobs per $1 billion, with increased consumer spending, as opposed to 11,000 per $1 billion with the military. So there really isn't any defense of the military budget on this basis in terms of job creation.

JAY: But adding money in terms of consumer--direct consumer spending is still--doesn't come close to what it would in health and education from what you found.

POLLIN: Right. Right. Spending the money on a consumer basket is not nearly as good as the areas that I talked about--green economy, health care, education--to a significant degree, because you have a higher proportion of those jobs from us consumers buying imports. And when we buy imports, of course, we're not adding to the demand for workers in this country; we're creating demand for workers in other countries.

JAY: Thanks for joining us, Bob.

POLLIN: Thank you very much.

JAY: And thank you for joining us on The Real News Network.


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