Is the Next Defense Budget a Stimulus Package?
Why the Pentagon Can't Put America Back to Work
It's the magic incantation to fix our economic woes. Many states and federal agencies have already gone from scouring their budgets for things to cut to green-lighting construction projects. The Obama administration's $787 billion stimulus package is sure to muster many shovels in an effort to rouse a despondent economy and put Americans back to work.
Here's the strange thing though: That package was headline news for weeks, bitterly argued over, hailed and derided in equal measure. And yet road construction, housing projects, and green retrofits aren't the only major projects getting the shovel-ready treatment via massive infusions of cash.
At the end of February, another huge "stimulus" package was announced but generated almost no comment, controversy, or argument. The defense industry received its own special stimulus package -- news of the dollars available for the Pentagon budget in 2010; and at nearly $700 billion (when all the bits and pieces are added in), it's almost as big as the Obama economic package and sure to be a lot less effective.
Despite the sort of economic maelstrom not seen in generations, the defense industry, insulated by an enduring conviction that war spending stimulates the economy, remains almost impervious to budget cuts. To understand why military spending is no longer a stimulus driver means putting aside memories of Rosie the Riveter and the sepia-hued worker on the bomber assembly line and remembering instead that the Great Depression came before "the Good War," not the other way around. In World War II, it's also important to recall, the massive military buildup was labor intensive, employed millions, and was accompanied by rationing, austerity, and very high taxes.
This time around, we began with boom years and spent our way into the breach, in significant part by launching unnecessary, profligate wars. Meanwhile, President George W. Bush cut taxes at a more than peacetime pace and borrowed like an addicted gambler on a losing streak to underwrite his wars of choice, including his Global War on Terror. If the former president's nearly trillion dollar (and counting) global war got us into this mess, by simple logic it's not likely to bail us out as well.
Riding the Slide to Billions
While the good times rolled during the long slide from surplus to deficit, from no war to global war, it wasn't just the Merrill Lynches and subprime mortgage giants that cleaned up. Lockheed Martin, Boeing, and Northrop Grumman -- the top three defense contractors -- had a ball, too.
In 2002, the first full year of what came to be known as the Global War on Terror, for instance, those three companies -- ranking first, second, and third on the Pentagon's list of top ten contractors -- split $42 billion in contract awards, more than two-thirds of the $67 billion distributed among the top 10 Pentagon contractors.
In 2007, the last year for which full contracting data is available, the same Big Three split $69 billion in Pentagon contracts, which was more than the total received by the top 10 companies just five years earlier. The top 10 divvied up $121 billion in contracts in 2007, an 80% increase over 2002. Lockheed Martin, the number one Pentagon contractor, graduated from a mere $17 billion in awarded contracts in 2002 to $28 billion in 2007. That's a leap of 64%. Given such figures, it's easy enough to understand how the basic military budget -- excluding money for actual war-fighting -- jumped from about $300 billion to more than $500 billion during the Bush years.
Given the economic climate, it's no surprise that the three defense giants have all posted losses in the past few weeks. But before the hankies come out and the histrionics start, it should be noted that Lockheed Martin alone has an $81 billion backlog in orders, enough to keep chugging along for another two years without a single new contract.
If such war spending had been an effective stimulus for the economy, we would be roaring along on 12 cylinders today. But increasingly this kind of spending mainly stimulates corporate shareholders, stock prices, and (of course) war itself.
No matter, the staggering new defense budget ensures that, for the defense industry, some version of good times will continue to roll, even if the economic impact of these huge military investments proves negligible and the need in other areas is staggering.
The 2010 Defense Budget
President Obama is reportedly intent on digging deep into the Pentagon budget. He has given his Office of Management and Budget until April to complete an "exhaustive line-by-line" review of the detailed budget request before it is released. In speeches, he has focused on wasteful and unnecessary defense spending.
Just days ago, Obama insisted that "the days of giving defense contractors a blank check are over." To underline that assertion, he cited a 2008 Government Accountability Office study that found 95 military projects over budget by a total of $295 billion. He pledged to end such egregious practices, and the no-bid contracts that often go with them. That applause line plays well at a time when belts are tightening uncomfortably and boot straps remain elusive, but it misses a reality, no less potentially important in the Obama era than in the preceding one: for (at least) the last eight years, defense contractors haven't needed a "blank check" because they already have the combination to the safe, the PIN number to the account, and a controlling interest on the board of the bank.
Given the promised size of the next Pentagon budget, no matter what weapons programs are cut or companies and contracts disciplined, the "bank board" will remain the same because the overall amount available to it shows no signs of changing. In fact, basic funding levels (not including money still being set aside for the wars in Afghanistan and Iraq) are remarkably in line with the most recent Bush administration budget, right down to prospective further increases. The just released overall figure for the 2010 Pentagon budget is actually $533.7 billion; that is, $20.4 billion higher than Bush's last base budget.
President Obama does not like the term "Global War on Terror" (GWOT), dispensing with the Bush administration's moniker of choice to describe the most costly array of military operations since World War II. But Obama's Pentagon will continue to spend a GWOT-sized chunk of our national treasure, even as troops trickle home from Iraq, and the surge relocates to Afghanistan's inhospitable steppes. The preliminary figure for war-fighting in 2010 is $130 billion, which represents a modest decrease from the $144 billion that is expected to go to military operations in 2009. Add that to the base Pentagon budget and you get a subtotal of $664 billion for 2010 military expenditures.
If the estimated costs of military spending lodged in other parts of the federal budget (like funding for nuclear weapons which is considered the bailiwick of the Department of Energy), as well as miscellaneous non-Defense Department defense costs -- about $23 billion last time around -- are also included, then President Obama's first military budget should come in at around $670 billion.
After the preliminary budget figures were released, Secretary of Defense Robert Gates told reporters, "In our country's current economic circumstances, I believe that represents a strong commitment to our security." Almost $700 billion is a strong commitment alright. Unfortunately, as a stimulus commitment -- and a largely unquestioned one at that -- it is certain to prove a drag on our economic recovery, despite the claims of the defense industry and their ever-present publicists and lobbyists.
Lifting America by the (Combat) Bootstraps?
And are we hearing those claims these days! The Aerospace Industries Association (AIA), representing more than 100 leading defense and aerospace corporations, has been trumpeting their contributions to the economy in a print ad campaign and on their website under the catch-phrase: "Aerospace and Defense: The Strength to Lift America."
In terms of American well-being, the AIA estimates that defense and aerospace manufacturers contribute $97 billion in exports a year, while maintaining two million jobs. As Fred Downey, an association vice president, told the Associated Press, "Our industry is ready and able to lead the way out of the economic crisis."
As the association sees it, defense and aerospace corporations are about as shovel-ready as you can get. The U.S. Bureau of Labor Statistics (BLS), however, offers quite a different view of the AIA's two-million jobs claim. Their "Career Guide to Industries," for example, looks intensively at Aerospace Product and Parts Manufacturing (which would also include some non-defense related corporations) and finds that the sector employed 472,000 wage and salary workers in 2006. Now, this is not the whole picture of defense-related employment, but according to the Associated Press, the BLS estimates that only 647,000 people work in industries where at least one-fifth of the products are defense-related.
Perhaps the AIA was including not just jobs making weapons, but jobs lobbying Congress to pay for them. Then Downey and crew might almost have a case. The BLS would probably not consider lobbyist jobs to be defense-related, but maybe they should because the Center for Responsive Politics, a research group that tracks money in politics, reports that the industry spent $149 million on lobbying firms to get its points across to Congress and the administration last year. That has to be a lot of shovel-ready jobs right there.
Speaking of shovel-ready jobs shoveling out defense industry claims, if the lobbying sector is happy, ad firms must be ecstatic. These days, defense contractors and associations are spending striking sums on what's politely termed "public education": full-page ads in major newspapers, ads in Washington metro stations near the Pentagon, Crystal City (a Virginia community where many Pentagon satellite offices are located), Capitol Hill, and other places where the powerful congregate when their limos are in use, not to speak of aggressive pop-up ads on political news sites like the National Journal.
Lockheed Martin, for example, recently unveiled a new ad campaign pitched towards troubled economic times. It depicts proud blue-collar workers above the tagline: "95,000 employed, 300 million protected." At the bottom of the ad are the logos of the supersonic fighter plane known as the F-22 Raptor and the International Association of Machinists and Aerospace Workers whose members build it. As if to underline these messages, 200 members of Congress signed a January 20th "Dear Mr. President, Save the F-22" letter, meant to be waiting for Barack Obama as he entered the Oval Office. The letter asserted that the F-22 program "annually provides over $12 billion of economic activity to the national economy."
Even if that dubious claim were substantiated, the economic activity comes at a high cost. The United States spent more than $65 billion to design and produce the F-22 Raptor -- a fighter plane originally conceived to penetrate the airspace of the long extinct Soviet Union, to counter large formations of enemy bombers in Cold War scenarios that are today inconceivable, and to achieve air superiority high over Eastern Europe whose greatest problems now involve a potential region-wide economic meltdown. In the wake of the Cold War, as military analyst Chalmers Johnson recently pointed out, the F-22 lacks a role in any imaginable war-fighting scenario the U.S. might actually find itself in.
Efforts to promote the plane as a critical tool in the Global War on Terror floundered when Defense Secretary Gates spoke plainly about the system's uselessness last year. "The reality," he said, "is we are fighting two wars, in Iraq and Afghanistan, and the F-22 has not performed a single mission in either theater."
Fortunately for Lockheed Martin, once the U.S. economy began to crater, it could emphasize a new on-the-ground use for the F-22 -- as an instant make-work jobs program.
However, even there the plane's utility is questionable. William D. Hartung, director of the New America Foundation's Arms and Security Initiative, points out that, if the F-22 program is cut, the "job losses will be stretched out over two and half years or more, and could happen after the end of the current recession." In addition, Lockheed has had to back away from the 95,000 jobs claims, clarifying that more than 70% of those jobs are only indirectly related to the F-22, and that just 25,000 workers are employed directly on the plane's construction. Winslow Wheeler is the head of the Center for Defense Information's Straus Military Reform Project and his scholarship is built on more than 30 years of service at the Government Accountability Office and on the Senate Budget Committee, among other places. He points out that, when it comes to high-tech weapons, today's military-industrial complex bears not the slightest resemblance to its World War II predecessor as a job generator. As he describes it, in the early 1940s "production lines cranked out thousands of aircraft each month: as fast as the government could stuff money, materials and workers into the assembly line."
In stark contrast, the F-22, he points out, is essentially an artisanal product. "Go to Lockheed Martin's plant," he writes. "You will find no detectable movement of aircraft out the door. Instead you will see virtually stationary aircraft and workers applying parts in a manner more evocative of hand-crafting. This 'production rate' generates one F-22 every 18 days or so." This is, in fact, what shovel-ready largely means in Pentagon stimulus terms these days.
War for Jobs?
Economists have also weighed in on why "war for jobs" as a way out of recession or depression has entered the world of mythology. An analysis from the University of Massachusetts' Political Economy Research Institute, for instance, finds that, for every one billion dollars invested in defense, 8,555 jobs are created. By contrast, the same billion invested in health care would create 12,883 jobs, and in education, 17,687 jobs or more than double the defense stimulus payoff.
It has often been said that World War II -- and the production stimulus it offered -- lifted the United States out of the Great Depression. Today, the opposite seems to be the case. The "war economy" helped propel the U.S. into what might turn out to be another great depression, and so, unlike in 1929, as our economy crumbles today, we are already on a global war footing.
As the Obama administration grapples with economic disaster and inherited wars, it will have the added challenge of confronting a military-industrial complex accustomed to budgets that reach almost three quarters of a trillion dollars, based on exaggerated global threats, unsubstantiated economic claims, and entrenched profligacy. When Obama's analysts pour over the budget, looking at all those overpriced weapons and plum contracts, they'll have to ask: Is each weapons system or program actually needed for American security and is it cost effective? Or are the defense contractors shoveling a load of shovel-ready bull?
Frida Berrigan is a Senior Program Associate at the New America Foundation's Arms and Security Initiative (ASI). She is a columnist for Foreign Policy in Focus and a contributing editor at In These Times.
[This article first appeared on Tomdispatch.com, a weblog of the Nation Institute, which offers a steady flow of alternate sources, news, and opinion from Tom Engelhardt, long time editor in publishing, co-founder of the American Empire Project, author of The End of Victory Culture, and editor of The World According to Tomdispatch: America in the New Age of Empire.]