Why the Pentagon Can't Put America Back to Work

Is the Next Defense Budget a Stimulus Package?


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?

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