Does the Military Create Private Sector Jobs?
Last night coming home from work I had neither my iPod nor my smartphone and therefore none of my usual conservative listening fare, so I was stuck with NPR. During the news, they ran a story talking about the benefits of military spending in places like Huntsville; how defense spending creates not only high-paying jobs in tech fields, but also in the greater community. For example, they interviewed the curator of an art museum, lauding the relatively good economic climate in the area. This all, of course, was in the context of Gates' proposed DoD budget cuts.
So my question is this: government spending does not create jobs, the feds cannot and have not spent us out of the recession, even where there are worthwhile projects money is not spent efficiently, etc. But, does this hold true for military spending? Is the story a lot of typical spin, or is defense contracting an exception to the rule?
This is something I've wondered about before, particularly when you look at technologies that eventually make their way out of the military into consumer products. But again, more than just the benefits of a company like Lockheed-Martin developing something that will eventually end up declassified and in our hands, there are the other, non-defense related jobs. NPR cited "a study" that found communities surrounding non-military base defense facilities are more economically sound than "others," and that for every defense job, 2 others are created. I'm intrigued, and could use some ideas.
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Nov '10
Re: Does the Military Create Private Sector Jobs?
The big problem with the NPR argument is that they forget that those dollars spent by the military come from somewhere else, hence reducing jobs elsewhere. Given that government spending is generally much more inefficient than private sector spending, defence spending probably costs more jobs (direct and indirect) than it creates.
Of course without an adequate defense department, the country is not likely to have any real jobs at all; zeks don't get paid. So if NPR can convince liberals - who often seem to believe that the best defense is a big group hug - that defense spending is useful, well, so much the better.
Jun '10
Re: Does the Military Create Private Sector Jobs?
Wow, NPR is more hawkish on Pentagon spending than Eric Cantor? Now that's a new development. Reducing the federal debt is going to be tougher than I thought.
Jun '10
Re: Does the Military Create Private Sector Jobs?
I think the truth is that, yes Virginia, the federal government can behave like a Santa Claus. The awarding of defense contracts does stimulate and prop up local and regional economies. But that's only because the federal government doesn't directly manage how defense programs are managed and run. Thank God, that companies like Lockheed-Martin, Rockwell, Boeing, etc. are still for the most part in charge of who they hire and how to bring to life what they create. Defense contractors also are able to sell their wares to friendly foreign countries as well thereby serving markets beyond just the federal government/taxpayer...profits of which come back to support local and regional economies. It is a form of government assistance but one that works because the government doesn't manage it on a day-to-day basis. If these corporations ever become nationalized we should expect aircraft, missiles, computers, software, and a whole myriad of systems that are substandard or just don't work. Our defense structure will begin to look very third-world-ish.
May '10
Re: Does the Military Create Private Sector Jobs?
I think the difference is that defense contractors are actually building real, cutting edge technology, not simply shuffling paper. That said, job creation is a perverted justification for building unnecessary technology. I think the cuts that Gates has described are probably chump change in terms of what can be wrung out of the system. I just hope that other departments are equally forthcoming. I for one, would love to see the Dept of Education give back $80 billion.
May '10
Re: Does the Military Create Private Sector Jobs?
The missing component is the National Security angle. If the government wants to spend money on an infrastructure project it may get built with heavy equipment purchased from Japan. School computers may be bought from a company that builds their products in China. Even Food Stamps buys imported goods.
But defense contractors and politicians alike know that military spending with foreign countries does not sit well with the electorate. A higher percentage of defense dollars stay home.
Jun '10
Re: Does the Military Create Private Sector Jobs?
To paraphrase Colin Powell...we need to "cut it off and kill it."
May '10
Re: Does the Military Create Private Sector Jobs?
SPIN! Military spending, like government spending, may create jobs. But what it does not do is create productive jobs that the market could not create. Strictly speaking, the government can create jobs. Hypothetically speaking, the government could seize $50,000 dollars from Warren Buffet's savings and use it to pay Peter to dig holes and pay Paul to refill them. In this case, 2 jobs were created via government spending. However, 2 unproductive, wasteful jobs were created.
The military may be a necessary institution, but it certainly is not productive. It deals in destruction and brutality. Naturally, communities around military installations are better equipped to withstand an economic crisis because the survival of the major industry or firm in town is ensured by government subsidies.
But we cannot forget opportunity costs. If the government steals and spends $1 million to pay for undertaking x, that's $1 million the private sector cannot spend on undertaking y. Furthermore, the probability of undertaking y being more productive than undertaking x is significantly higher because the profit and loss system of the market incentivizes prudence and wisdom when it comes to investments. No such system exists to regulate government "investments."
Edited on Jan 7, 2011 at 8:42amMay '10
Re: Does the Military Create Private Sector Jobs?
There's a name for this: military Keynesianism. If one rejects the notion that an expansionary fiscal policy is a method of bestowing prosperity and overcoming recessions, then one must reject military Keynesianism. Cold War military installations and equipment that no longer ensure the defense of the nation against foreign aggression should be liquidated.
Jun '10
Re: Does the Military Create Private Sector Jobs?
Since when? I haven't seen massive protests in the streets by average tax paying Americans that defense contractors shouldn't sell their wares to foreign countries. From crazed Marxists and Communists perhaps but that is to be expected.
Here's how it works...the feds award a contract for fighter aircraft or some sort of other system to an American contractor and its subcontractors. They build it and after it's delivered to the one of the armed services it may enjoy sales later (at some point) to say Saudi Arabia, Taiwan, Israel, what have you. This isn't spending at this point, this is a revenue generating business. The State Dept. is happy. DOD is happy. Wall Street is happy. Main Street is happy.
Taxpayers are unhappy when they're overcharged ($200 hammers) for technology or weaponry...but not necessarily because they somehow dislike the notion of military spending to make the country secure with sophisticated weapons and defense systems.
Dec '10
Re: Does the Military Create Private Sector Jobs?
This makes a lot of sense. So, because government contractors are profit-driven and must (in most cases) keep shareholders happy, they actually act like the real companies they are - innovating, applying, making sales and reinvesting in an efficient manner.
Jun '10
Re: Does the Military Create Private Sector Jobs?
This smacks of isolationism. Who is to say whether Cold War military installations and equipment are no longer ensuring the defense of the nation against foreign aggression? Perhaps one of the reasons that another nation (not a band of Islamist terrorists) hasn't attacked us since WWII is precisely BECAUSE we still have a presence throughout the world, have rapid deployment capability, the largest navy in the world, a nuclear submarine fleet that is virtually impossible to track, a wide array of missile systems, and surveillance systems - all as a result of our Cold War defense posture. Are there programs and areas that could be scaled back and cut?Of course. But a general statement about defense assets that are obsolete without citing specific examples is pretty weak.
May '10
Re: Does the Military Create Private Sector Jobs?
Brian,
My proposition was...
This smacks of fiscal prudence, not isolationism. Isolationism is the governmental policy of refraining from associating with foreign nations, involving not just military non-interventionism but protectionism as well. I argue on behalf of neither.
My point is that if the military is spending money on endeavors that do not contribute to the defense of the nation from foreign aggression, then it needs to cease and desist. The primary threat during the Cold War came from the communists e.g., the Soviet Union and China. Those same threats no longer exists, hence our military means designed to hedge against those threats should be converted or extinguished. Maintaining means against non-existent ends for which those means were designed is a waste of tax dollars. Anyone and their mother can think of Cold War era military undertakings that no longer need to be financed. I pick on the Cold War because of this reason.
Clinton's de-militarization during the 90's harmonizes with what I am arguing here.
May '10
Re: Does the Military Create Private Sector Jobs?
Here's an excellent video from the Cato Institute on reducing military spending.
Jun '10
Re: Does the Military Create Private Sector Jobs?
As a Huntsville resident, I offer my two cents. As is true with many other defense oriented communities, this area's economic growth found its origins in part from military defense and space exploration investments, both government and private. Over time, many government engineers retired, started and joined private companies. I'm greatly simplifying things, but in time, the result was a means to attract an expanding high-tech labor workforce. The presence of this workforce in turn attracts businesses of all sorts - DoD, contractor and non-DoD service oriented enterprises. Today, while Huntsville for now remains in the middle of missile defense and NASA, numerous other ventures have found opportunity, from telecommunications to biotechnology.
The point I want to make is that while military spending has the potential to be a catalyst in job creation for the private sector, there are other key factors: community dynamics, workforce talents and education, a healthy business environment, time and well, success. It's not just about the big fish that get the big contracts. It's the presence of small businesses and contractors that comprise support teams that also enables local commerce to expand, thus creating more jobs. Takes the right mix.
Edited on Jan 7, 2011 at 9:34amMay '10
Re: Does the Military Create Private Sector Jobs?
I wasn't talking sales, I was talking purchases. Can you image the political outrage if we bought fighter jets from AirBus or had Navy vessels built in Japan? Those kinds of things are always going to built at home.
Nov '10
Re: Does the Military Create Private Sector Jobs?
Michael Labeit: ...the profit and loss system of the market incentivizes prudence and wisdom when it comes to investments. No such system exists to regulate government "investments." · Jan 7 at 8:35am
Edited on Jan 07 at 08:42 am
Sure there is Michael--Congress!
Just thought I'd offer some levity.
Jun '10
Re: Does the Military Create Private Sector Jobs?
EJHill
I wasn't talking sales, I was talking purchases. Can you image the political outrage if we bought fighter jets from AirBus or had Navy vessels built in Japan? Those kinds of things are always going to built at home. · Jan 7 at 9:27am
Sorry for the misunderstanding. Hopefully it won't come to that and the only way to ensure that won't happen is to make sure BHO isn't re-elected.
May '10
Re: Does the Military Create Private Sector Jobs?
J. C. Casteel
Michael Labeit: ...the profit and loss system of the market incentivizes prudence and wisdom when it comes to investments. No such system exists to regulate government "investments."
Sure there is Michael--Congress!
Just thought I'd offer some levity.
I almost blew up and said "WHAT!?!" and then thought "oh, ok."
Jun '10
Re: Does the Military Create Private Sector Jobs?
Michael Labeit:
...The primary threat during the Cold War came from the communists e.g., the Soviet Union and China. Those same threats no longer exists, hence our military means designed to hedge against those threats should be converted or extinguished.
Who is to say that Russian won't at some point be a threat? Or Iran? Syria? Venezuela? Pakistan? North Korea continues to be a threat. The threats are different but no less real. Ordinance, technology and expertise has been and continues to be exchanged amongst these states. Why does Venezuela need missile technology? For self defense or for possible future adventurism? It's dangerous to assume that the lack of a Cold War threat translates into no threat at all. Again, we both agree that certain programs or efforts should be curtailed. But many programs created for the Cold War defense posture are still as viable today as when they were deployed. The argument is what is necessary to defend against ANTICIPATED threats that are not readily apparent because our adversaries cloak them in secrecy.
Re: Does the Military Create Private Sector Jobs?
I'm with you in spirit, but I can't help but notice that this very medium -- the interconnected matrix of servers known as the "internet" -- was the spawn of 1950's and 1960's era defense spending. It started life as the DARPAnet, evolved into the internet, then the web, and then to Twitter and cat videos on YouTube.
What's not value-creating about that?