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defense spending Archive

Friday

1

February 2013

0

COMMENTS

No, Defense Spending Decline Not Behind Lackluster Economy

Written by , Posted in Big Government, Economics & the Economy

President Obama has found a new way to blame Republicans for his poor economic record. The government released preliminary GDP numbers for the 4th quarter of last year, and they were not good. The popular spin coming from the White House, his ideological echo chamber and the sycophantic media has been that government spending cuts, namely to defense, are to blame. In other words, it’s the fault of those wascally Wepublicans.

The claims being made are partly true, in that reducing government spending will, at least in the short run, reduce GDP. But that’s a tautology – GDP is defined to produce that result. It tells us nothing about the drivers of economic growth. Where the claims go wrong is in asserting that the same relationship exists between government spending and actual economic health. GDP is just a tool for measuring the economy, and it’s not even the best one. Dan Mitchell explains:

GDP numbers only measure how we spend or allocate our national income. It’s a very indirect way of measuring economic health. Sort of like assessing the status of your household finances by adding together how much you spend on everything from mortgage and groceries to your cable bill and your tab at the local pub.

Wouldn’t it make much more sense to directly measure income? Isn’t the amount of money going into our bank accounts the key variable?

The same principle is true – or should be true – for a country.

That’s why the better variable is gross domestic income (GDI). It measures things such as employee compensation, corporate profits, and small business income.

These numbers are much better gauges of national prosperity.

Consider this. We are being asked to believe that the US economy took a hit because the government spent less on defense. For that to be true, we must accept the flip side that defense spending grows the economy? But is that true? Certainly defense spending, up to a debatable level and excluding waste, has value to society in that it protects us from harm. But that’s not the same as making us wealthier. In fact, we accept that we are sacrificing a bit of wealth to pay for security. But let’s not pretend there’s no sacrifice at all – that we wouldn’t have an even higher standard of living if government wasn’t taking that money in the first place. Of course we would. Every tank is a neighborhood never built, or an office building that couldn’t be funded, or a business that wasn’t be expanded.

Put another way, if defense spending grew the economy, then all it would ever take to end a recession is to increase defense spending. That’s essentially the Keynesian stimulus argument, though for ideological reasons they typically prefer other forms of government spending than defense. But that’s not how the economy works.

The point is that how we measure things can deceive us if we do not differentiate the statistical tool itself from the thing it is measuring. The economy does not grow because government redistributes wealth, it grows when capital accumulated through savings and investment is put to use.

Wednesday

4

May 2011

0

COMMENTS

Even Facts Can ‘Lie’

Written by , Posted in Foreign Affairs & Policy

I stumbled across an info graphic comparing military expenditures versus that of foreign aid, making the argument that people drastically overestimate how much is spent on foreign aid. But before I get to that, here’s the infographic:

It’s hard to read at this size (full image here), but I think you can get the drift. The U.S. spends less than other nations on “aid” and more on the “military” (used interchangably with defense) both in real terms and as a percentage of GDP.

All of the information presented here is factual. But this is an excellent illustration of how facts, without correct understanding and context, can be misleading. For instance, the image explains that U.S. foreign aid spending includes “disaster relief, long term poverty reduction, hunger prevention, and human rights programs.” That’s all well and good, but our foreign aid spending also includes one very important category not mentioned: military spending. That’s right, much of what we spend on the military is actually foreign aid, as it is spent on the defense of other countries.

The reason France, the UK, Japan, and Germany, among others, can spend so much less on defense is because we are spending it for them. Those troops we keep in their countries aren’t defending our borders, they are defending theirs. Sure, we get some marginal benefits (sometimes), but they get to take what they would spend on defense and spend it on social welfare. We are subsidizing their welfare states with our defense spending. If that isn’t foreign aid then I don’t know what is.

I think many Americans asked how much we spend on foreign aid take this fact into account. They understand that, yes, defending countries for them is aiding them. Don’t get me wrong, even if the graphic was adjusted to account for military spending that is actually aid and not primarily defensive, it’s probably still true that the public grossly overestimates what we spend on foreign aid. It would also still be true that reducing foreign aid would have little fiscal impact compared to the growing entitlement problem. But there are other good reasons to rethink foreign aid, such as whether or not most of it is even effective. It’s also a good reason to rethink our allocation of military spending and  whether it is being put to good use, or in some cases could even be done without.

Wednesday

13

April 2011

0

COMMENTS

Are There Limits to Free Trade?

Written by , Posted in Economics & the Economy, Foreign Affairs & Policy, Free Markets

I am a strong advocate of free trade. I also tend to pooh-pooh complaints about “unfair” Chinese trade practices. I even advocate unilateral free trade in the face of international protectionism as a better alternative to domestic protectionism. Despite all this, there might be a time where even I think free trade can be problematic – or more precisely, when other considerations might trump free trade – and that’s when it involves national security.

Two companies are competing for a contract worth up to a billion dollars to supply the Air Force with a new kind of plane designed for light attack and armed reconnaissance (LAAR) missions. One of the companies is Hawker Beechcraft, a Kansas-based company, and the other is Embraer, which is Brazilian owned and operated. I won’t bother evaluating the relative merits of the two companies’ aviation production capabilities, because I wouldn’t know where to begin. I’ll limit my focus instead to the issues of trade and national security, topics of which I am more familiar.

If someone were to ask me if we should buy military equipment from overseas, I would be forced to give that favorite answer of academics and scientists: it depends. It depends on the equipment, on the country or origin, the available alternatives, and of course the various costs of each.

For instance, many might reflexively say it is better from a national security perspective (all economic considerations being equal for the sake of discussion) to build a plane in the U.S. than to buy it from overseas.  Sounds reasonable enough. But my knowledge of trade and globalization forces me to consider a related question: just how American are those American made planes?

Remember that whole auto bailout fiasco? There were many who justified the intervention on the grounds that there would be no American automotive sector without GM, Ford, and Chrysler.Let’s consider the assumption while setting aside the question of whether the companies would have died for good without government help. What about the cars made right here in America by Toyota or Honda? There is foreign investment in “American” GM, American investment in “foreign” Honda, American jobs created by Toyota, and foreign parts in Ford. In fact, Cars.com found a few years ago that the Toyota Camry was the most American vehicle, besting even Ford’s F-150 on the scale of ‘Americanness.’ So much for saving the “American” automobile sector.

Be skeptical of claims that simplify complex global economic systems into “domestic” versus “foreign.” It’s rarely so simple. The idea that we can construct something with as many working parts as a modern plane of war entirely within the U.S. is simply no longer practical. I’d bet money that even “American” Hawker Beechcraft will be using foreign parts.

Of course, this doesn’t exactly settle the question of whether national security dictates that normal economic considerations be overridden and domestic military manufacturing given special favor. For instance, buying a piece of an airplane from overseas is not exactly the same as purchasing the whole kit and caboodle. Unless the piece can only be purchased from that country, the producer really has no leverage over us, as we can always take our business elsewhere if they try anything fishy.

So where does this leave us? It depends. The issues of national security are grave enough, and the answers to these questions murky enough, that I’m willing to set aside my instincts for unfettered free trade and grant at least a slight home field advantage. I don’t think we should demagogue the idea of using the entire world marketplace to build our military forces where practical, but if it comes down to it, we should start the home team with some extra points on the board.

Wednesday

5

August 2009

0

COMMENTS

House Buys Jets Air Force Didn’t Want

Written by , Posted in Waste & Government Reform

Deficit spending is out of control.  At times like this, Congress should be looking everywhere for savings.  It certainly shouldn’t be forcing the purchase of items that haven’t been requested:

In the 2010 defense spending bill, the Air Force originally requested money for one C-37 and three C-40s as part of its effort to replace its aging fleet. But the House Appropriations Committee added an extra $132 million for two more C-37s and $200 million for two more C-40s, according to an aide to the panel.

…Though Roll Call reported Wednesday that two of the C-37s are to be assigned to units that routinely transport government officials and members of Congress, the aide disputed the notion that Congress was just awarding itself an upgrade, saying both types of jets can be used for “many purposes” including transport of military personnel and officials — not just elected officials.

“It’s not like there’s two planes assigned for flying members of Congress around,” the aide said. “It’s not like Congress is buying Congress planes here.”

But when asked about the addition, Pentagon spokesman Geoff Morrell said the military generally frowns upon any appropriations that are above and beyond what is asked for, adding the military only asks for what it needs.

…Tom Fitton, president of the watchdog group Judicial Watch, said members of Congress are abusing the military by using their jets too often for travel. He said that except for trips to war zones, members should fly commercial and expense it. He surmised the latest funding for more jets reflects members’ personal interest in being able to fly in style.

“Congress wants to be ferried around as if they’re kings and queens and they want to do it on taxpayer dime,” he said.

In addition to the self-interest apparently behind this particular case, Congress has a perpetual problem separating legitimate military needs and back-yard politics.  Every member of Congress wants money funneled to his or her district, and military projects are a favorite means to accomplish that goal.  Some are even open about it, arguing that we should support this or that allocation because it “creates jobs,” and not just because it’s necessary for the defense of this nation.  It doesn’t.  Every dollar spent must first be taken out of the private sector.

Frivolous spending is every where.  If we are ever going to get our fiscal house in order, we need to be just as serious about reducing unnecessary spending in the name of defense as we are all other kinds.

Tuesday

7

April 2009

0

COMMENTS

Gates Unveils Defense Budget With Big Cuts

Written by , Posted in Waste & Government Reform

The new budget proposal includes significant cuts and changes.

Defense Secretary Robert M. Gates outlined sweeping changes to the defense budget Monday that would shift billions of dollars in Pentagon spending away from elaborate weapons toward programs more likely to benefit troops in today’s wars.

…The effort to pare back weapons programs that Gates derided as “truly in the exquisite category” reflects a growing recognition in the Pentagon that the days of soaring defense budgets are over. And it highlights Gates’s long-stated desire to increase spending on surveillance systems and other relatively low-tech weapons that are best suited for guerrilla or irregular war, which has traditionally been an industry backwater. “I’m just trying to get the irregular guys to have a seat at the table and to institutionalize some of the needs they have,” he said.

…Among the weapons taking the biggest hits are the Navy’s DDG 1000 destroyer, a stealthy ship whose cost has ballooned over the past decade. The Navy will purchase only three of the advanced ships and then revert to building the Arleigh Burke-class destroyers that have been a mainstay of the fleet for years.

Gates recommended halting production of the Air Force’s F-22 fighter jet at 187 planes — four more than the current number — and killing the new presidential helicopter program.

Defense procurement procedures are typically riddled with wasteful spending.  Gates’ biggest foe in taming this beast will be Congress.  Congress critters benefit greatly by spending your tax dollars on systems developed in their home district, regardless of whether those systems provide any kind of strategic asset.  For instance, Joe Lieberman whined that halting the production of the F-22, “would result in the loss of thousands of jobs in Connecticut.” And he’s not the only one. But who cares?  Our defense budget exists to defend America, not redistribute the workforce.  I applaud Gates for taking on this establishment.

All aspects of our government need to be cut, and that includes defense.  Wasteful boondoggles like the F-22 need to be stopped when they balloon out of control.  That’s never happened in the past, but perhaps it will start happening now.  We also need to reassess our commitments around the world and ask just whether we really need to expend so many resources defending other countries that are perfectly capable of defending themselves.  I’m looking at you, Europe.

All that being said, it’s very unfortunate that defense is the only thing Obama can bring himself to cut.  In fact, he is doing to opposite in most cases as he massively expands spending nearly across the board, when he should be doing the same for domestic spending as he is on defense.