The drumbeat of fear has begun about potential defense cutbacks. For example, the National Association of Manufacturers released a report saying the nation will lose 1 million jobs if the automatic sequester goes into effect (the “fiscal cliff”) next year. This would include 25,000 jobs in Washington state.
The sequester will probably never happen. America spends more on defense than the next 14 or 19 nations, depending on methodology, and is the world’s largest arms dealer. It is winding down two wars that lasted longer than American involvement in World War II and in both Iraq and Afghanistan the results are disappointing, to put an optimistic spin on it. The money to wage these wars was largely borrowed from Red China, which our defense establishment is now teeing up as the next “enemy.”
The real lesson of these scary reports is that the American economy is far too dependent on military Keynesianism. In the past, when wars ended the economy shifted back to a peacetime footing. Sometimes that did cause recessions on the way to more productive growth (a peacetime economy produces more healthy returns than blowing things up). Now we’re being told that’s impossible. That sound you hear is Dwight Eisenhower spinning in his grave.
Some of you remember Ike, the Republican president who led eight years of peace and prosperity (“Everything is booming but the guns,” said AFL-CIO President George Meany). Eisenhower was also a retired five-star general and the Liberator of Europe, hardly a commie (except to the John Birch Society). At the end of his terms, in 1961, he warned against the rise of what he called “the military-industrial Complex,” which would seek to drive policy to grow at all costs, no matter the national interest:
In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.
If America is ever again to achieve the public goods begun under Ike — major initiatives such as the Interstate Highway System and NASA — as well as pay down the deficit, it must cut defense spending and break the power of military Keynesianism. Well-paid teachers and high-speed trains would give a far better return on investment than, say, the potential $6 trillion the wars of the past decade will end up costing us. Or the F-22 fighter ($400 million each), which isn’t safe to fly. The discussion should be how to wind down defense spending to a sensible level in an orderly manner that causes the least disruption.
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Today’s Econ Haiku:
(And insurers make big bucks)