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Lawmakers: Can military spending create jobs?

Oct. 27, 2011 - 01:53PM   |   Last Updated: Oct. 27, 2011 - 01:53PM  |  
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Lawmakers on Capitol Hill are debating whether military spending should be viewed as not only vital to national security but also a form of economic stimulus.

"As a fiscal conservative, I tend to oppose increasing government spending for the purpose of job creation," said Rep. Buck McKeon, R-Calif., chairman of the House Armed Services Committee.

"But I think we must understand that the defense industry is unique in that it relies entirely on federal government dollars."

McKeon's committee summoned an unusual panel of academic economists on Wednesday to testify about the economic impact of defense spending and how that might sway lawmakers' decisions about the Pentagon budget.

One economist suggested a surge in military spending in the next one or two years as a way to boost the economy.

"We ought to ask the military services if they can move forward in time some of the replacement and repairs of the inventory that is going to happen anyway," said Martin Feldstein, a Harvard economist.

Defense Secretary Leon Panetta has said the defense cuts threatened under the current budget deal forged in August will add 1 percentage point to the unemployment rate — currently above 9 percent — and also eliminate 1.5 million jobs.

The economic impact of defense spending varies geographically. For example, in Virginia, the defense industry accounts for about 19 percent of all jobs across the state, providing $44 billion in personnel incomes to residents and more than $1 billion in state revenue, according to a study conducted in 2008.

Some lawmakers criticized the notion that defense spending can boost the economy.

"As we make defense spending decisions here in this country, I think it's important to clarify our greatest consideration should not be the multiplier effect of any given government spending. … First and foremost, it's military strategy," said Rep. Todd Young, R-Ind.

If the goal is to simply boost the economy, non-military spending should be considered, said Rep. Hank Johnson, D-Ga.

"What we are talking about here is a philosophy of government spending," Johnson said.

One economist disagreed that all government spending is equal.

"There are technical differences that are not ideological or philosophical in nature," said Peter Morici, who teaches economics at the University of Maryland. "If a widget manufacture gets all of his materials in the U.S. and employs entirely U.S. labor, it will have a higher multiplier effect. … Defense spending tends to have a greater domestic content than does a construction program. We use a lot of imported materials in construction."

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