Members of Congress, led by the team of Senators McCain, Graham and Ayotte, are touring military contracting plants, bases and defense-dependent communities this summer raising the alarm about “sequestration.” This is the part of the current budget deal that will force $1.2 trillion in across-the-board cuts to federal spending, unless Congress comes up with the same amount of money some other way. Half is supposed to come from the military, half from domestic programs, beginning January 2.
It is true: cutting everything indiscriminately is no way to run a government. But this alarm-raising campaign, buttressed by defense industry spending to buy and promote “independent”studies, and mount lobbying campaigns, is focused not on federal spending in general, but on military cuts in particular. And the centerpiece of their pitch against these cuts is not the standard line that we need to spend ever more on the Pentagon because it needs every penny to keep us safe. Instead the focus is: jobs.
We’re in the process of ending two wars. Since 9-11, spending on the Pentagon has nearly doubled. Clearly we’re due for a military budget downsizing.
And the urgent need for job creation is on everyone’s mind.
That’s why the military contractors and their congressional allies are departing from the usual script to argue for more military spending.
From the crowd that wants to shrink government because this will create jobs, we are now hearing that we can’t shrink the Pentagon because that would cost jobs.
Here are main points of their case, rebutted one by one.
Myth # 1: The military cuts will cost a million (or, according to the Pentagon, a million and a half) jobs.
You don’t need to get into the details of the many reasons to question these figures to recognize the big flaw: Cutting military spending will only cost jobs if nothing else is done with the money. As economists from the University of Massachusetts have shown, (findings recently corroborated by economists at the University of Vienna [i]) military spending is an exceptionally poor job creator. Taking those cuts and investing them in other things—clean energy, education, health care, transportation—will all result in a net gain in jobs. Even cutting taxes creates more employment than spending on the military.[ii]
Myth # 2: More Pentagon spending will create more jobs.
A researcher at the Project on Government Oversight recently exposed the shaky foundation of this argument. He found that since 2006 the largest military contractor, Lockheed Martin, has increased its revenues from military contracts, even as it was cutting jobs.[iii]
Myth # 3: Defense sequestration will gut our military industrial base.
Hardly. The Pentagon cuts contained in the budget deal will bring the military budget, adjusted for inflation, to where it was in 2006. Close to its highest level since World War II. More than the next 17 countries (most of them our allies) put together.[iv]
These cuts are easily doable, with no sacrifice in security, because they are being made to a budget that has nearly doubled since 2001.
Myth # 4: The public is buying the myth.
President Obama is actually running an ad criticizing his opponent for advocating military spending increases. The clear pattern in recent polling shows that this is a smart move. Majorities agree military spending is too high.[v]
Myth # 5: The military economy is part of the bedrock of our jobs base.
A researcher at the Project on Defense Alternatives looked at this one. He cited a Congressional Research Service study of aerospace employment. More than 500,000 Americans are employed in aerospace manufacturing. About two-thirds of this is commercial, however. Though the defense industry has worked hard to spread itself around for maximum political effect, more than half (61%) of the nation’s aerospace industry jobs are concentrated in six states.[vi]
By contrast, more than 8 million Americans are employed in education, law enforcement, fire fighting, and other emergency and protective services — working in every community in America.
The effects on the jobs base from cuts on the domestic side of the budget, in other words, will be much larger and more widespread than the effects of military cuts.
Myth # 6: The military economy is part of the bedrock of our overall economic health.
Alan Greenspan, among many others, has contrasted spending on infrastructure, education, and health care with military spending. The former, he noted, strengthens the productivity—the performance—of the economy as a whole; the latter does not.
Military spending is like a family’s insurance policies, he said. The family should spend enough to insure against disaster, but not a penny more, because that family should put as much as possible toward increasing its well-being through education and other enhancements to its quality of life.
Myth # 7: Military workers have already taken their share of the hits.
No. The global outplacement firm Challenger, Gray and Christmas tracks layoffs month by month. For the past three years, while military spending has absorbed more than half of the discretionary budget (the part Congress votes on every year), the private sector contractors it supports have absorbed an average of only 4% of the nation’s job loss. See this spreadsheet (docx).
During those three years, the defense industry laid off a total of 106,000 workers. During the same period, state and local governments laid off more than 500,000 workers.
Myth # 8: The political campaign against sequestration is consistent with the dominant economic philosophy of the politicians doing the campaigning.
No again. The free marketeers who think shrinking government will create jobs are preaching that the Pentagon budget can’t be shrunk because this will cost jobs.
Congressman Barney Frank has summed up nicely what they are asking us to believe: “that the government does not create jobs when it funds the building of bridges or important research or retrains workers, but when it builds airplanes that are never going to be used in combat, that is of course economic salvation.”
Myth # 9: The contractors have their workers’ interests at heart.
If they did, they might narrow the gap a bit between the CEO’s and the average worker’s salary. For Lockheed Martin (CEO: $25 million[vii]; average worker: $58,000[viii]) this gap is more than 400 to 1.
Myth # 10: Sequestration will force contractors to warn most of their workers of an impending layoff.
Lockheed is threatening to send these notices a few days before the November election. The argument for this bit of political blackmail is that since the cuts aren’t specified, all workers are at risk. While Lockheed claims these notices are required by law, the Labor Department, i.e. the controlling legal authority, says they are not.
In fact, as researchers from Win Without War and the Center for International Policy recently pointed out,[ix] the defense and aerospace industry is sitting on a pile of cash from yet another year of record revenue and profits in 2011.[x] Lockheed alone has $81 billion in backlogged orders, and more coming in.[xi] They have it a lot better than most companies.
And this cushion gives them time to plan for the downsizing, and keep the workers they profess to care about employed, by developing new work in other areas. See Fact Sheet: Replacing Defense Industry Jobs for some ideas on how.
Footnotes
[i] https://www.dropbox.com/s/6s4ix8muj2kmhhx/a%20non%20linear%20defense%20growth%20nexus.pdf
[ii] http://www.peri.umass.edu/236/hash/0b0ce6af7ff999b11745825d80aca0b8/publication/489/
[iii] http://pogoblog.typepad.com/pogo/2012/08/defense-contractor-time-machine-less-spending-more-jobs-analysis-reveals.html#more.
[iv] http://www.usnews.com/debate-club/should-congress-repeal-the-scheduled-cuts-to-defense-spending/7-reasons-to-keep-the-defense-budget-sequestration-cuts
[v] http://www.slate.com/articles/news_and_politics/frame_game/2012/08/obama_s_ad_against_military_spending_have_polls_shifted_on_the_defense_budget_.html?utm_medium=referral&utm_source=pulsenews
[vi] “US Aerospace Manufacturing: Industry Overview and Prospects,” Congressional Research Service, December 3, 2009. http://www.fas.org/sgp/crs/misc/R40967.pdf.
[vii] http://www.businessinsider.com/the-highest-paid-ceos-at-the-largest-us-based-financial-companies-2012-6#2-george-roberts-kkr-49
[viii] http://www.peri.umass.edu/236/hash/0b0ce6af7ff999b11745825d80aca0b8/publication/489/
[ix] http://www.huffingtonpost.com/william-hartung/lockheed-martin_b_1625183.html
[x] http://www.pwc.com/en_US/us/industrial-products/assets/pwc-aerospace-defense-review-and-forecast.pdf
[xi] http://online.wsj.com/article/BT-CO-20120620-709424.html