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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

The Defense Counterfactual



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Robert Reich has written a provocative op-ed:

Over 1,400,000 Americans are now on active duty; another 833,000 are in the reserves, many full time. Another 1,600,000 Americans work in companies that supply the military with everything from weapons to utensils. (I’m not even including all the foreign contractors employing non-US citizens.) 

If we didn’t have this giant military jobs program, the U.S. unemployment rate would be over 11.5 percent today instead of 9.5 percent.

And without our military jobs program personal incomes would be dropping faster. The Commerce Department reported Monday the only major metro areas where both net earnings and personal incomes rose last year were San Antonio, Texas, Virginia Beach, Virginia, and Washington, D.C. — because all three have high concentrations of military and federal jobs.

Yet Reich’s point isn’t that we should expand the defense budget, nor that we should pare back this jobs program. Rather, it’s that we should have different jobs programs that draw on taxpayer dollars.

Having a giant undercover military jobs program is an insane way to keep Americans employed. It creates jobs we don’t need but we keep anyway because there’s no honest alternative. We don’t have an overt jobs program based on what’s really needed.

That is, Reich wants to militarize the civilian economy. 

Here is my problem with Reich’s static analysis: if we didn’t have this military jobs program and federal expenditures were reduced by a commensurate amount, we’d presumably be dealing with a far more attractive fiscal picture. We could maintain a lower tax burden, or at least not rack up nearly as much debt. It’s easy to imagine that this might increase domestic consumption and investment, as well as work effort.

Moreover, what are the circumstances under which we’d dissolve or have no need for this military jobs program? The world in which we this military jobs program never came into existence might have been a much safer, more peaceful world, in which the risk premium associated with energy exports and a wide variety of other goods, e.g., the cost of air travel, would be vastly lower. Countries ravaged by brigandage, piracy, and other threats that vex the U.S. military wouldn’t be dampening global GDP, and the U.S. would have more prosperous export markets. 

Or this other world might be a far more dangerous one in which great power rivalries and horizontal nuclear proliferation led to a much poorer, less populous world, plagued by fallout. I’m guessing that unemployment levels would be pretty high indeed under this scenario, as humans abandon cities and turn to an Iron Age way of life as portrayed in Russell Hoban’s Riddley Walker. Who knows?

Note that my counterfactual and Reich’s counterfactual have very different implications. He assumes that entrepreneurs wouldn’t fill the breech left by a smaller military operating in a safer world. Rather, he assumes that the government would have to step in. My guess is that while we might overspend on the military — in some domains and at some times — the military does play some non-negligible role in shaping the global security environment, which in turn has fairly significant economic implications.

My basic takeaway is that we shouldn’t treat the military as a jobs program. We should use the military to help create a safer world in which the U.S. economy can prosper. And we should use government to facilitate private sector job creation by sticking to the basics. 



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