Military contractors are eager to promote the theory that cuts in military spending — and the resulting decrease in government contracts for their businesses — will slow the economic recovery. A large part of their strategy has focused on promoting statistics showing the oversized effect of cuts in military spending on economic growth.
But statistics about the role of military spending in the U.S. economy are often used to misrepresent the importance of military contractors. Yesterday, USA Today ran an article titled, “Defense Cuts Starting To Pinch Economy.” It said:
Military defense spending fell by about $12 billion, or 3%, from October through May compared with the same period in the previous federal budget year, according to the Congressional Budget Office.
The Bureau of Economic Analysis, which measures defense-related spending more broadly, said last week that weaker defense spending shaved half a percentage point off first-quarter growth. Instead of growing 2.4%, the economy grew 1.9%
Instead of turning to an objective source, USA Today turned to Lockheed Martin to interpret the data. “Already, defense contractors are feeling the effects. Lockheed Martin CEO Robert Stevens said recently that his company’s workforce is 18% smaller than three years ago, and “‘the pace of our hiring has slowed considerably,’” the article says.
Indeed, war spending has gone down slightly as the U.S. completed its withdrawal from Iraq but the Pentagon’s core budget has actually gone up. Furthermore, the article fails to address the fact that had war funding not decreased, revenue would have to be raised through taxes, cutting other programs, or increasing the deficit. All three options would have negative effects on the economy.
But what goes unmentioned is that the Pentagon’s budget for contractors, like Lockheed, actually increased over those three years. Lockheed’s reduction in work force is far more easily explained by the company’s mismanagement of the Joint Strike Fighter program which has been delayed for five years and labeled “acquisition malpractice” by the Defense Department.
What military contractors fail to address is the fact that defense spending is not a jobs program. Defense spending “is a collective effort to address the facing the country, assure our national security, and secure our interests abroad,” write the Center for American Progress’ Lawrence J. Korb, Alex Rothman and Max Hoffman. “Therefore, the level of defense spending should be dictated by our national strategy and fiscal capacity, both of which point towards a drawdown.”
If job creation is the desired outcome, as outspoken proponents military spending now argue, then far better returns can be enjoyed from funding domestic priorities such as education health care and clean energy. Those sectors create at least 50 percent more jobs per dollar of public spending.