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Confirmed: Defense Spending Creates Fewer Jobs Than Other Types of Spending

George Washington's picture




 

Washington's Blog.

Yesterday, I pointed out
that a study by one of the leading economic modeling companies shows
that military spending increases unemployment and decreases economic
growth.

I have located a paper
by economist Robert Pollin published in 2007 by The Political Economy
Research Institute at the University of Massachusetts, Amherst -
entitled "The U.S. Employment Effects of Military and Domestic Spending
Priorities" - which concludes:

We present in Table 1
our estimate of the relative effects of spending $1 billion on
alternative uses, including military spending, health care, education,
mass transit, and construction for home weatherization and
infrastructure repair.

[Click image for larger version]

The
table first shows in column 1 the data on the total number of jobs
created by $1 billion in spending for alternative end uses. As we see,
defense spending creates 8,555 total jobs with $1 billion in spending.
This is the fewest number of jobs of any of the alternative uses that
we present. Thus, personal consumption generates 10,779 jobs, 26.2
percent more than defense, health care generates 12,883 jobs, education
generates 17,687, mass transit is at 19,795, and construction for
weatherization/infrastructure is 12,804. From this list we see that
with two of the categories, education and mass transit, the total
number of jobs created with $1 billion in spending is more than twice
as many as with defense.

"Military Keynesianism" - the idea that war is the best economic stimulus - is false.

Update: Pollin published an updated version of his paper on October 20, 2009. The abstract summarizes their updated findings:

The
authors compare the effects of a $1 billion military investment
military and the same investment in clean energy, health care,
education, or individual tax cuts. They show that non-military
investments create a much larger number of jobs across
all pay ranges. With a large share of the federal budget at stake,
Pollin and Garrett-Peltier make a strong case that non-military
spending priorities can create significantly greater opportunities for
decent employment throughout the U.S. economy than spending the same
amount of funds with the military.

And here are a chart and table from the updated study:

 

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Mon, 11/16/2009 - 16:30 | 132246 Anonymous
Anonymous's picture

How many jobs are created by throwing hundreds of billions at zombie banks?

Sat, 11/14/2009 - 22:44 | 130985 mannfm11
mannfm11's picture

All government spending destroys employment.  What they miss is that defense spending that is involved in building arms is a technology machine. More than anything else, military spending has created a technology advantage for the US over time.  The problem is that the bulk of military spending is political and not military. 

Sat, 11/14/2009 - 17:52 | 130813 Hammer59
Hammer59's picture

Poppies for young men, death's bitter trade---all of those young lives betrayed; all for a children's crusade. -Sting  "Dream of the Blue Turtles"   I imagine that the "war on terror" is a much more noble cause. 

Sat, 11/14/2009 - 21:23 | 130940 Fibozachi
Fibozachi's picture

indeed Hammer59 ... the "War on Terror" is both a true modern day Robespierre and at the same time a perfect hollow, fifth-of-a-fifth terminal throwover term/ concept of ambiguity and obfuscation. 

That said, and staying as far away from 9/11 as possible ... once authored a 50+ page study which basically held that the UN and America's use of it was/is but only as pretext for the undeniably blatant propagation of economically induced, offensive war in the name of self-defense ... from Andy Jackson and Jimmy J. Polk (who got what was coming his way for screwing over Mexico by dying from Cholera, or, more appropriately termed "explosive diarrhea") to to the Civil War and the sinking of the Maine in 1898 ... and while not necessarily allowing but certainly being forced to wait for Pearl Harbor to take action, to, please ... let's not even begin detailing the past 65 years of "defensive" war.

 

Please don't hack my head off for the link below, which, while just a tease, is both valid and interesting.

It is a print version link so as to avoid ads etc., just make sure to hit cancel as it will bring up the print screen.

2001 Repeated? How Stock Market Predicts Wars and Terrorism: History shows that social violence tends to FOLLOW stock market declines

Sat, 11/14/2009 - 15:55 | 130751 Hammer59
Hammer59's picture

The USSR effectively went bankrupt embroiled in a failed military action in Afghanistan. (10 yrs.)  America is about to do the same.  We lost big in Viet Nam, and we are losing big in Iraq/Afghanistan. All the money we spend--and we cannot defeat an enemy with no technology, no airforce, no tanks, no missiles, no mortars, no bombers. No--our "Empire" days are over. We are broke.

Sat, 11/14/2009 - 17:10 | 130795 Fibozachi
Fibozachi's picture

True Hammer59, re: USSR & Afghanistan ... but they were looking for a deep-water southern port to rival St. Petersburg and Murmansk, much the same way that they had developed Vladivostok militarily and, more recently, Nakhodka economically. 

 

Moreover, recently released CIA documents have confirmed much of what Matt Simmons and Dan Yergin have wrote extensively for years:  that as the fields of Baku began to peak in the 70's and were summarily flooded, quite crudely, to maintain their output for Eastern European satellites, that the Russians were forced to take drastic action for the simple sake of economics; similar claims are being made today about PEMEX' Cantarell and the Saudi's great Ghawar.

 

To that end, the Soviets sought about taking over Afghanistan for several geo-strategic reasons but principally it was because of various economic reasons ranging from the development of a deep-sea southern port to the monopoly of SE Asian oil transport lines to even the explicit control of the global heroine trade, whose economic importance is vastly, vastly underrated due to being "valued" at the initial point of poppy production rather than the actual price per brick paid to manufacturers, let alone that which traffickers or actual end-users ultimately pay.  But that is a whole 'nother story.

Sat, 11/14/2009 - 15:38 | 130743 Fibozachi
Fibozachi's picture

Also, since they are ONLY looking at a single data set for one single cycle ... from 2001 - 2008 ... their central "findings" are fundamentally flawed because they have no frame for their own metrics; there is no background to the metrics themselves as per socio-economic strata or socio-political overtones.  Do please correct me if I have misread the original article in haste.

Sat, 11/14/2009 - 15:51 | 130738 Fibozachi
Fibozachi's picture

From page 8:

"As of 2008, the U.S. government operated with a military budget of $624 billion. This is a 73 percent increase (in real dollars) relative to the level of spending in 2001. It amounted to 4.3 percent of GDP in 2008. An expenditure level of this magnitude will necessarily have a major impact in establishing the country’s policy priorities and overall economic trajectory."

 

Please note:

"This is a 73 percent increase (in real dollars) relative to the level of spending in 2001"

 

Because the DJIA is down c. 80% in inflation-adjusted ($) US DOLLAR terms since 2000. Just some frame for the issue writ large.

Sat, 11/14/2009 - 14:10 | 130695 delacroix
delacroix's picture

wasn't it william colby of the CIA who said "once everything the people believe is not true, we will have succeeded"

Sat, 11/14/2009 - 13:35 | 130672 Anonymous
Anonymous's picture

I find the figures pretty unconvincing. 1 billion dollars spent on education results in 29,000 equates to only about $34,000 per teacher. Even if one excludes school constructions costs and other administrative costs, I can't think of any school district in America that incurs such a low cost for the average teacher when they incorporate pension costs, health coverage, and other fringe benefits. The average compensation cost, including fringe benefits, for a Fairfax County teacher is around $110,000.

Sat, 11/14/2009 - 13:13 | 130651 Anonymous
Anonymous's picture

WOW,

The radical status quo'ers come out in force - and with ad hominem attacks, like this is a damn Yahoo board. Speaking of 'tards, most Ameri-cons LOVE to root for the big guy, all these Teddy Roosevelts and their big sticks,... and their small key boards.

somebody goes out and tries to quantify where our defense? dollars go and how effective they are, and you guys go all lynch mob on him? WTF

The Pentagon should be out running these numbers, when they come asking for more money. They can't ramp up their numbers because each toy soldier/Boeing/Raytheon drone costs between 500k and 1mil, in country.

Why do you think Obama is not rushing to give all those troops to the permanent war in Afghanstan?

He does not have the money, he gave it all to GS.

Sat, 11/14/2009 - 12:22 | 130633 THE DORK OF CORK
THE DORK OF CORK's picture

Silicon Valley would not have developed but for defence spending in the 60s and the development of smart munitions for Vietnam in particular.

on the other hand the USA commitment to the above made coming off the Gold peg almost inevitable

so you win some ,lose some take your pick.

Sat, 11/14/2009 - 09:48 | 130581 Anonymous
Anonymous's picture

You "Green Jobs" toddlers are a hoot. Just because Amherst is a groupthink asylum doesn't negate the premise of the model, but it sure distorts it. Of course we are too broke to play Empire any more, Ron Paul says the same thing. But creating a new economy based upon a different myth will also end in tears.

Sat, 11/14/2009 - 09:06 | 130565 duckweed
duckweed's picture

I know how to make a pine box, hell these warhawks might be onto something...

Sat, 11/14/2009 - 08:00 | 130543 Anonymous
Anonymous's picture

Military spending is not based solely or even primarily on its
economic benefits or lack thereof. It is predicated on having
the means to meet potential threats and or obligations.

That it also provides non military capability such as disaster response resources should not be lost on policy makers as well. After the Boxing Day tsunami when the UN was holding news conferences in New York announcing what they intended to do, it was an American aircraft carrier in the region that was providing actual assistance to the devastated people of Sumatra.

Back in 1960, in the halcyon days of the American economy, this nation, with a population of 180 million, spent about 50% of the Federal budget on defense and had military forces that numbered some 3,400,000, 99% of whom were men. In fact, our military forces are smaller both relatively and
absolutely today so by what measure are we overspending on defense. Personally, I think reinstituting a draft and creating a large territorial army would be a good way to mop up high levels of youth unemployment and give them career and job training.

Sat, 11/14/2009 - 04:31 | 130518 Anonymous
Anonymous's picture

I'd take this study's conclusions with care. For starters, as revealed by the biographical blurbs at the end, these authors are not exactly immune to advocacy research:

"His recent books include A Measure of Fairness: The Economics of Living Wages and Minimum Wage in the United States" and "She is a co-author of “Green Prosperity: How Clean-Energy Policies Can Fight Poverty and Raise Living Standards in the United States,” “The Economic Benefits of Investing in Clean Energy,” and “Green Recovery: A Program to Create Good Jobs and Start Building a Low-Carbon Economy.”

In other words, their publishing history appears to be rife with a methodology that starts with the conclusion already in mind and finding data to fit their conclusion. One could just as easily cite Spain's experience in losing 2.2 jobs for every "green" job produced to refute the "green jobs" number, for example.

Secondly, since the paper is just an abstract and a summary of tables, the authors haven't included a detailed explanation of their methodology in the link that George cited, but this statement doesn't exactly inspire confidence:

"We are confident intheir reliability as estimates, but we cannot claim that they are accurate down to the level of every detail. There are two basic reasons for this. First, one faces a wide range of technical challenges in developing empirical estimates of matters such as those we are posing here. No model will adequately capture the full range of variables that produce economic outcomes, such as job creation, in the real world."

Given such qualifiers, it's difficult to imagine why this shouldn't be considered anything more than an exercise in theoretical application--if they are just "estimates," then how can we be sure that they didn't dismiss data which didn't fall into line with their conclusions? (Again, their CVs show them to be advocacy researchers, individuals notorious as a group, regardless of their political stance, for beginning with a conclusion in mind and finding data that will confirm their preconceptions while ignoring that which contradicts them)

The study is also weakened by the limited time window--only the numbers from 2007 are cited. A far more useful and comprehensive analysis should probably go back roughly 25-30 years when all this deficit spending really began ramping up in order to provide a more complete picture.

Lastly, it seems odd that the researchers would not even consider the effect of taxes into this equation (I'm going off of the criteria they cite on pages 4-5), even though they mention the amount of money spent for the Iraq war at the beginning of the study; almost all of the categories they chose to compare would be useless without it, and because taxes pay for both federal and state spending programs that have broad economic impacts.

Sat, 11/14/2009 - 02:14 | 130480 mock turtle
mock turtle's picture

it seems intuitively obvious that investing and building to blow stuff up 5 thousand miles away is an investment dead end

where as all the other expenditures on the list provide an input back to the econom

furthermore the cost of empire around the world in the form of foreign bases, of which the usa has between 700 and a thousand involves spending huge amounts of dollars abroad

compounding all this our military possesses a 100 times redundancy of power and then some necessary to defend our country...ie, one us carrier task force can project enough destructive power to destroy any country on the face of the planet and we have 11

the ICBMs and the bombers and fighters round out the picture and we haven even discussed the army and marines

im in favor of a strong military but we spend more on war craft than all other nations on the face of the planet combined

the country is being sucked dry by the bankstas and the war hawks

Sat, 11/14/2009 - 21:24 | 130944 DaveyJones
DaveyJones's picture

"it seems intuitively obvious that investing and building to blow stuff up 5 thousand miles away is an investment dead end"  - that's funny

Sat, 11/14/2009 - 01:40 | 130474 Anonymous
Anonymous's picture

it would be nice to know about the quality of jobs created....and put a slightly differnt way, does one source of job creation provide better paying jobs...so rather than expressing the issue as the number of jobs created what is the gross payroll of the that 1b usd?

Sat, 11/14/2009 - 01:32 | 130467 Anonymous
Anonymous's picture

this malarky from the military industrial complex sickens me.....i would rather starve under a bridge than save the economy via war.....

the mantra about ww2 saving us from the depression is both historically untrue and morally repugnant....it is another mind control technique of the jingoistic imperalistic neo-con operation paper clip whores of war....

it is also another example of the cia newsfakers using correlation without causality and simply lying to us year after year to beat into our heads the loveliness of war....

the von mises institute has some material repudiating this bullshit...

Sat, 11/14/2009 - 09:42 | 130578 Anonymous
Anonymous's picture

I rather think that the war only forced upon us the necessary austerity to get on the other side of the debt bubble. If Government would be honest and deal with their own mistakes (CRA>Citi Redlining Suit>American Dream Act) with a lighter hand then the pain will be intense but comparatively brief.

Sat, 11/14/2009 - 09:08 | 130566 duckweed
duckweed's picture

hear here!

Sat, 11/14/2009 - 21:22 | 130942 DaveyJones
DaveyJones's picture

+

Sat, 11/14/2009 - 00:57 | 130455 Anonymous
Anonymous's picture

Military spending spent on research is good. Nuclear energy, radar and many other invention that are good for economic growth come from military research.

Sat, 11/14/2009 - 00:43 | 130448 Paul S.
Paul S.'s picture

Are you TD's retarded little brother and that's why he let's you post here?  Please put up a link where a "war hawk" suggests we start several more wars as an economic panacea.  Otherwise piss off back to where you came from.

Sat, 11/14/2009 - 03:43 | 130476 George Washington
Sat, 11/14/2009 - 11:36 | 130612 Paul S.
Paul S.'s picture

Exactly.  You don't have any examples.  The link you provided doesn't have any "war hawks" proposing to get us into several more wars will pull us out of the economic crisis.

Sat, 11/14/2009 - 12:03 | 130622 George Washington
Sat, 11/14/2009 - 13:49 | 130679 Paul S.
Paul S.'s picture

The research you have posted all alludes to the theory that if the government decides to spend its way out of this recession, that military spending is the most prudent/best/logical course.  However, the bastardized term to describe this, "military keynesianism", is akin to asking the qustion "Do you still beat your wife?"  I don't believe in Keynesian economics, not because the theories are necessarily flawed but because the countercyclical fiscal policy necessary to sustain it is politically untenable (raising taxes during boom times to pay down debt).  However IF we are going to try to spend our way out of it, I would rather that money go to national defense.  Why?  Not because I think it is an economic solution and not because I'm pro-war (I am an unabashed non-interventionist) but because national defense is a legitimate priority of the federal government.  Given the choice between that and taxpayer funded corporate bailouts, I'll take military spending anyday of the week and twice on Sunday.  That doesn't make me or anyone else who thinks that way a military keynesian though.

In addition, I have yet to see any article proposing we initiate more wars as an economic balm despite the amount of googling you've done.

 

 

Sat, 11/14/2009 - 15:16 | 130731 Rainman
Rainman's picture

I can't cite any article proposing more wars as an economic balm, either.

Only the evidence of the VietNams, Grenadas, Desert Storm, Iraq, Afghanistan ....modest skirmishes, historically speaking.....would indicate an unstated desire to use military force as a means to reinforce the need for greater disbursement of national treaure to the military - industrial mechanism as an economic and political priority. Once created and interwoven into the economic GDP fiber, military spending is politically and economically unpleasant  to unwind. The only way to sustain it is to periodically use the capability to ....hopefully....kick the crap out of a too-small-to-win adversary.

And W took it to a new level. Understanding full well that the defense realignment and subsequent recession of the early 90s doomed his father's re-election ( the old man was deleveraging the Star Wars spend-a-thon ) , W pulled the old Guns AND Butter trick of tax cuts while simultaneously ramping military capablity for the Iraq offensive. Luckily for him, he was in a balanced budget environment as a result of the poison pill his father swallowed and Clinton's reluctance to really mix it up with Al-Qaeda. 

By 1956, Ike knew better than anyone that a growing disconnect had been baked into the cake relative to ramped-up WW II military spending and peacetime growth priorities.  And he warned about it on his way out the door. Although he got the national highway system underway, there was much more to be done domestically. Unfortunately, the growing political concern regarding Communist incursions in Indonesia dealt a strong hand to the military interventionists and their growing legions of associated capitalists. That led us into the quicksand of VietNam and the derailing of domestic priority once again.

Even though none of this is in a playbook, there can be no doubt that  suitable job enhancement projects outside the service industry , finance, technology, and military are wanting. Especially for the modestly skilled without a technical education or general expertise.

Just my 2 cents on a complicated  and interesting subject.

Sat, 11/14/2009 - 11:35 | 130611 Anonymous
Anonymous's picture

Exactly. You don't have any examples. The link you provided doesn't have any "war hawks" proposing to get us into several more wars will pull us out of the economic crisis.

Fri, 11/13/2009 - 17:36 | 130156 openwheel11
openwheel11's picture

Hmmm.. A self proclaimed "Progressive Think Tank" doesn't like defense spending. Somehow replacing existing cheap energy with unreliable expensive "green" energy creates more jobs than paying union workers to build airplanes that have to use made in USA content.. Knock me over with a feather..

Fri, 11/13/2009 - 17:23 | 130141 Anonymous
Anonymous's picture

Hmmm a self proclaimed "Progressive think tank" finds that spending on healthcare and green energy generates more jobs than military spending... What a surprise. Please explain how replacing existing cheap energy infrastructure with unreliable expensive new green energy infrastructure is a net generator of jobs?

Sat, 11/14/2009 - 01:35 | 130469 Anonymous
Anonymous's picture

i'm all for a debate....bring on some evidence
refuting the findings...

i am not a fan of the environazi movement but
also am not a fan of argumentation by doubt...

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