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Defense Spending as Jobs Program

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New study out of UMass-Amherst affirms the obvious in a methodologically rigorous way:

Congressional debates on deficit reduction have highlighted the assertion that large cuts in the military budget would produce negative impacts on jobs in the U.S. economy. The Pentagon itself suggested that military cuts in the range of $1 trillion over the next decade would add one percentage point to the U.S. unemployment rate. But whether or not this particular forecast is accurate, the most important question is not the absolute number of jobs that are created by spending a given amount. It is rather whether spending that money on the military creates a greater or lesser number of jobs relative to spending the same amount on alternative public purposes, such as education, health care or a clean-energy economy, or having consumers spend that amount of money any way they choose.

As Pollin and Garrett-Peltier show, in comparison to alternative uses of funds, spending on the military is a poor source of job creation. They find that $1 billion spent on the military will generate about 11,200 jobs. By contrast, spending those funds on alternative purposes would create 15,100 jobs for household consumption, 16,800 jobs for clean energy, 17,200 jobs for healthcare, and 26,700 jobs for education.

Here’s the “but.” Defense spending is a radically inefficient way of generating jobs through government spending. However, it’s by no means certain that any money cut from the defense budget will actually be applied to, well, anything. Defense spending acts as a mild stimulus; when stimulus is hard to come by, policymakers have to take this effect seriously. Moreover, substantial cuts to the defense budget (which I heartily favor) will without a doubt eliminate many solid, well paying manufacturing and service jobs. No such thing as a free lunch, and all that.

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