In the closing days of the U.S. election season, the airwaves are full of dire warnings about the massive job losses that will supposedly occur if the Pentagon's budget declines significantly in coming years (it hasn't, yet). A series of ads by Karl Rove's Crossroads GPS is typical of the genre. In New Mexico, for example, where Rep. Martin Heinrich is trying to succeed retiring Sen. Jeff Bingaman, one GPS ad explains, "Heinrich voted for deep, automatic cuts that could cost New Mexico 20,000 jobs." Similar ads are running in Virginia. The unsubtle message: No sitting member of Congress deserves to be returned to office or elevated to a higher office if he or she voted for legislation that would actually cut spending.
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But an equally effective series of ads might have talked about the jobs that would be created when government spends less and taxes are cut. The Pentagon might be a jobs program, but it isn't a very efficient one. It creates the kinds of jobs that politicians like to claim credit for, but military spending doesn't produce more growth in the economy or generate more innovation than a comparable level of spending by private individuals, businesses, and entrepreneurs.
First, some context. Overall U.S. military spending is likely to decline modestly, but most of these savings derive from the end of the Iraq war and the drawdown in Afghanistan. The Pentagon's base budget (excluding the costs of the wars) remains near historical highs in real, inflation-adjusted dollars and is currently projected to keep pace with inflation, at least into the early 2020s.
Such facts haven't stopped Crossroads and others from asserting that hundreds of billions of dollars have been cut, with hundreds of billions more looming under last year's Budget Control Act. The claim that such cuts, were they to occur, would threaten U.S. national security, is debatable. But most of the focus has been on the tens or hundreds of thousands of people who will be thrown out of work if the cuts go forward.
The source of these statistics? The Aerospace Industries Association (AIA), the trade group representing the interests of some of the United States' largest defense contractors.
The AIA has sponsored several studies on the economic effects of sequestration, and all have concluded -- unsurprisingly -- that they would be catastrophic. One study by George Mason University's Stephen Fuller predicted that a reduction of $45 billion in Defense Department procurement spending would result in the loss of 1,006,315 full-time, year-round equivalent jobs. A subsequent paper, published this July, concluded that the automatic cuts to both defense and non-defense spending would eliminate 2.14 million jobs.
A number of scholars have challenged Fuller's conclusions. The Mercatus Center's Veronique de Rugy faulted the report as "packed full of mistakes, arbitrarily high multipliers … and obscure methodology and exaggerations." The Brookings Institution's Peter Singer noted that no more than 3.53 million jobs -- direct, indirect, and induced -- are sustained by the defense industry, so it is barely credible that a 10 percent reduction in Pentagon spending would result in the loss of one-third of all defense-related jobs.
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