Tag: government waste

Pentagon as Economic Dynamo: Not

The Pentagon is remarkable for its ability to contrive reasons to justify its bloated budgets.  In recent years, it and the gaggle of contractors, analysts, and journalists that support it have found military-security risks in everything from “hot zone” diseases to global warming.  But with looming budget cuts, the defense establishment is being forced to downsize, albeit modestly.

To protect itself, it has now taken to fear-mongering.  Some of this is the usual:  the supposedly dire threats we face abroad – e.g., from distant, 10th rate military powers like Iran or Pakistan or al-Qaeda, or from major trading partners like China.  All of this, of course, is stated with a straight face even while our military spending dwarfs that of other nations combined.  Somehow, however, and even with the natural geostrategic advantages provided by two oceans, the U.S., at least in the eyes of our panicky military brass remains forever UNDER THREAT.

In addition to such perennial hyperbole, the Pentagon now warns that cuts will have nasty domestic consequences, raising unemployment and killing economic innovation.  It’s hard to argue that major military cuts might lead to job losses, not only among uniformed servicemen but also among the hordes of government contractors who’ve grown fat on defense budgets paid for by taxpayer dollars.

But that’s a good thing!  If in fact it happens – and, unfortunately, that remains a big if given the proven power of the military-industrial complex to defend its narrow self-interest – ex-soldiers and ex-contractors will find other ways of getting along.   Sure there will be some temporary pain for the displaced, but this will in the end help the larger economy and certainly the government’s budget picture.

As for innovation, the New York Times’s Binyamin Appelbaum has a front-page article today about that issue – one that’s worth reading as much for its misjudgments as for anything else.  

The article strives for balance, including a number of different viewpoints on how much impact military spending has on economic dynamism.  But its take-away lines, signaled by its original headline, “A Hidden Cost of Military Cuts Could Be Invention and Its Industries,” are that the Pentagon has an “unmatched record in developing technologies with broad public benefits – like the Internet, jet engines and satellite navigation – and then encouraging private companies to reap the rewards.”

“Unmatched?” Really?  How can one possibly make such a statement without placing it in context?  But for the Pentagon’s pull on the purse strings, those contracts might have been administered through other government agencies, rather than the military.  And they might well have been far more efficient.  Alternatively, the money sucked out of the private economy by taxes to fund the military might have been used for R & D directly, by investors and entrepreneurs.  And what of the countless amounts of R & D spending that have ended in nothing – or nothing better than a more efficient killing machine, usable only in wars?

Nowhere in the article is there anything but assumption that only the military, as some kind of beneficent and far-seeing midwife of invention, could have fostered these and other innovations.  Nowhere are there convincing arguments that most if not all of these developments wouldn’t have been made either through some other government R & D agency or through the market itself.

The article’s claim that 59 Nobel Laureates have received funding from the Navy fails to impress.  The fact that future Nobelists took money from a rich vein of governmental fat says nothing about whether the Pentagon’s influence led to their prizes.  It certainly doesn’t justify the claim that the military has had a “remarkable record of success.”

Nor does Appelbaum provide a convincing explanation for this unproven success.  One factor he raises is the “Pentagon’s relative insulation from politics which has allowed it to sustain a long-term research agenda in controversial areas . . . [n]o matter which party is in power.”  This view is myopic.  Certainly Congressmen are reluctant to halt weapons programs – because they are strategically sited in every Congressional district around the country.  That is not insulation from politics.  It is the very essence of politics, and for that reason leads to vast amounts of waste.

One expert is quoted as saying that the Pentagon is superior to other government agencies because “they are the customer. You can’t pull the wool over their eyes.”  But the Pentagon buys its products with taxpayer money, not its “own” money.  It feels little pain when, for instance, boondoggle aircraft carriers like the Gerald M. Ford, have billions of dollars in cost overruns.  Cosy relationships between the military, contractors, legislators, and journalists make for few if any incentives for economic efficiency.  Worse still, many new weapons systems have had poor safety records, resulting in injuries and deaths to our servicemen.

The article, to its credit, includes quotations from economists who raise such fundamental questions, showing just how inefficient Pentagon expenditures are compared to other government spending.  Yet Appelbaum fails to see that these studies call into question his bold claims.

Meanwhile, Appelbaum’s view is backed only by those who don’t appear to have thought enough about the issues.   One expert says he’d “like to see a lot less weapons and a lot less focus on them, but [defense spending is] not all about that.”  According to him, “If catalyzing innovation is going to be an important part of our economic strategy, then we better be careful how we handle” the military budget.

But if we really care about innovation in our economy, why would we ask the Pentagon to take part, much less take charge?  A shocking 55% of all government R & D spending is allocated to the military.  In fact, the military is a remarkably poor vehicle of economic dynamism – hardly surprising since, of course, that is not its mission.  If innovation is our goal, why not better fund government agencies tasked precisely with the goal of innovation?

One answer seems to be provided by another expert who is said to believe that “the Pentagon [has] an inherent advantage in funding research and development” and is quoted as saying that “War matters more.  People take it more seriously.”  In other words, only the Pentagon can convince our short-sighted Congress to provide money for long term R & D.

How sad.  But the bright side for the future is that if less tax money is squandered on the Pentagon, there will be more funds for private sector investment.  True, some innovations that require long-term R & D might be missed without a government hand in the process.  But if as a result the U.S. loses its competitive edge, Congress might even see fit to provide such funding to new agencies aimed precisely at creating technological advances – not to a Pentagon tasked with fighting wars.

Other economists are cited as arguing that Pentagon spending saves money by providing security within which economic growth can occur.  Even if true, that claim, of course, says nothing about whether the Pentagon is a good place to spend America’s innovation dollar.  It also assumes that there are threats severe enough to jeopardize growth.  Yet the spate of warfighting that the US has engaged in since the end of the Cold War has cost trillions.  And one of the main reasons we engage in so many of these operations is not because our nation’s security is truly threatened—but because we can, because we have the overblown military forces and high technology to do so.  Worse still, there is a good argument that these wars have created more enemies than they have destroyed.

My heart bleeds for the thousands of workers in Northern Virginia and around the country who have fed at the Pentagon’s trough for so long.  But why should they be any different from the rest of the U.S. economy, which must suffer through the adjustments that our economy periodically requires? The Pentagon and military contractors have for decades been a bastion of privilege – a protected little socialist republic within our capitalist state – immune from the laws of economics.  After a decade of gluttonous expansion, there is now a modest effort to rein it in.   

I look forward to the possibility however small of more cuts – and to the increased innovation and dynamism it is likely to spark in our economy.
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Pork Barrel Nation: From Prisons to Pentagon

Here is a fascinating story detailing how a network of legislators and corporations works together on bills such as Arizona’s recent and controversial immigration bill.  The two-part report shows corporations and trade groups writing laws, encouraging “lawmakers” to promote and pass them, then using the legislation to expand their businesses.  In this case, prison companies–one of the few bright spots in our woeful economy–were involved in writing the Arizona bill.  Now they stand to make millions from new jails for illegal aliens, especially women and children, awaiting deportation. 
All of this was conducted through an outfit called the American Legislative Exchange Council (ALEC), which disingenuously calls itself a nonprofit—and apparently has the IRS status to prove it.  After all, it’s not lobbying, it’s “educating” legislators, as ALEC’s leader states in the report.   Of course, ALEC is “educating “our representatives to support the bill prepared by its corporate members so that they can profit off of it later.  But it’s still education!
The focus of the report may be domestic, but the implications are obviously wider, including to the mother of all pork-barrelers, the military and its corporate hangers-on.  According to the Wall St. Journal, defense now accounts for over $700 billion annually, amounting to over 50% of domestic discretionary spending and an estimated 19% of all federal spending (dwarfing Medicare expenditures). 

Of course, we’ve heard talk from Secretary of Defense Robert Gates about the need to cut military spending.  The bipartisan National Commission on Fiscal Responsibility and Reform has discussed this as well.  And, most fortunately, with the election next week, we are bound to see an influx of deficit-hawk, Republican legislators eager to cut wasteful spending. Right?
Not.  When pork wears a uniform, it has a thousand friends—or at least 535, the House and Senate members whose districts and states feed off the swill.  We’ve already seen pre-emptive strikes against defense cuts on the op ed pages of the WSJ.   And groups akin to ALEC are laying plans to do some “educating.”  The Heritage Foundation’s James Carafano, for instance, is talking about teaching benighted freshman who might somehow question whether, in an era when there are no serious military threats to U.S. national security, we must keep on spending ever more.   Nothing like bang for your education buck!

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