Posted on 11/16/2009 2:32:27 PM PST by blam
Would The U.S. Start A War To Stimulate The Economy?
Politics / US Politics
Nov 16, 2009 - 08:08 AM
By: Washingtons_Blog
I've written two essays attempting to disprove "military Keynesianism" - the idea that military spending is the best stimulus. See this and this.
In response, a reader challenged me to prove that anyone would advocate military spending or war as a fiscal stimulus.
In fact, the concept of military Keynesianism is so widespread that there are some half million web pages discussing the topic.
And many leading economists and political pundits sing its praises.
For example, Martin Feldstein - chairman of the Council of Economic Advisers under President Reagan, an economics professor at Harvard, and a member of The Wall Street Journal's board of contributors - wrote an op-ed in the Journal last December entitled "Defense Spending Would Be Great Stimulus".
And as the Cato Institute notes:
Bill Kristol agrees. Noting that the military was "spending all kinds of money already," Mr. Kristol wondered aloud, "If you're buying 2,000 Humvees a month, why not buy 3,000? If you're refurbishing two military bases, why not refurbish five?"
***
This is not the first time that defense spending has been endorsed as a way to jump-start the economy. Nearly five decades ago, economic advisers to President Kennedy urged him to increase military spending as an economic stimulus...
Similar arguments are heard today. The members of Connecticut's congressional delegation have been particularly outspoken in their support for the Virginia-class submarine, and they haven't been shy about pointing to the jobs that the program provides in their home state.
The Marine Corps' V-22 Osprey program wins support on similar grounds. Despite serious concerns about crew safety and comfort, the V-22 program employs workers in Pennsylvania, New Jersey, Delaware and Texas, and a number of other states.
Professors of political economy Jonathan Nitzan and Shimshon Bichler write:
Theories of Military Keynesianism and the Military-Industrial Complex became popular after the Second World War, and perhaps for a good reason. The prospect of military demobilization, particularly in the United States, seemed alarming.
The U.S. elite remembered vividly how soaring military spending had pulled the world out of the Great Depression, and it feared that falling military budgets would reverse this process.
If that were to happen, the expectation was that business would tumble,unemployment would soar, and the legitimacy of free-market capitalism would again be called into question.
Seeking to avert this prospect, in 1950 the U.S. National Security Council drafted a top-secret document, NSC-68.
The document, which was declassified only in 1977, explicitly called on the government to use higher military spending as a way of preventing such an outcome.
[snip]
Completely agree, but there are still some people out there with excellent Reagan Conservative pedigrees advocating them.
And there are even Liberal Democrats who agree with them.
Defense + Veterans + Homeland Security + Nuclear Weapons/Fuel 10/09 = $91 billion
Medicare + Medicaid 10/09 = $86 billion
Social Security + Disability 10/09 = $65 billion
Interest on Public Debt 10/09 = $18 billion
The defense budget numbers are entirely driven by troop/sailor levels. Manpower + O&M is $50 billion alone, while Veterans + Defense Civil of another $17 billion is ongoing legacy costs of force levels.
Forward deployment overseas is the most expensive group of troops because of logistics costs.
Medicare/Social Security are entirely paid for by the FICA tax for the forseeable future, therefore they are not the cause of the deficit/income tax/corporate tax problems we face, although the spending levels they have are an abomination.
Welfare + Unemployment + Education + Energy + Foreign Aid + Agirculture Subsidies + Food Stamps + EPA in 10/09 = $43 billion
Bad as these are, they aren’t the locus of the problem.
Income Taxes (personal + corporate) = $57 billion
Deficit = -$176 billion
I'm not sure how seriously we're really supposed to take this. War is a fantastically inefficient and wasteful use of resources. But at least the Army Surplus stores would have good stuff again.
There’s always Honduras
History is clear: deficits occur with higher taxes, and with lower taxes. Politicians spend, regardless. But prosperity ONLY occurs with lower taxes.
Three oceans, the Rio Grande, and the Sonora Desert are worth more than 90% of the defense budget to our security. The US was very secure 15-20 years ago with a defense budget under $300 billion, and prices just 33% lower than today. I think with 50% of today's defense budget, we'd still be very secure. And we could reallocate $400+ billion of the economy to more productive activities than the modern day equivalent of Pyramid building.
Politicians spend, regardless.
Yes, lets run up the white flag on spending and just concede that we will suffer deficits and debt and the welfare state till kingdom come.
But prosperity ONLY occurs with lower taxes.
The period of 1947-1963 wasn't prosperous with 90% top marginal rates?
How about 1963-1973 with 70% top marginal rates? No prosperity?
How about 1983-1987 with 50% top marginal rates? Again, no prosperity?
No wait, 1993-2001, with 40% top marginal rates - no prosperity?
Your linkage has no empirical proof to it. I don't disagree with lowering taxes at the margin, but truly criticial to prosperity is limiting the bite of government on the economy, and eliminating artificial disincentives in the tax code.
Federal Taxes are currently running at $2 billion of a $14.5 trillion economy. That's under 14% and lower than anytime in recent memory. Its not excessive tax collections that are dragging on the eeconomy right now, but excessive debt.
The "prosperity" of the 1960s was pretty phoney too, and was soon seen in the destruction of the economy caused after JFK's tax cuts wore off and the LBJ Nixon tax hikes took effect.
But, I'm done with you. If you want higher taxes, go for it. The only way out of "deficits" is to have the private sector grow faster than government. Only Coolidge was able to hold down government spending for five years, and at a horrific cost to the U.S. in national security. So, go for it. No more responses from me.
Professor, that sort of misrepresentational crap is beneath you.
Only Coolidge was able to hold down government spending for five years
Both Truman and Eisenhower did so too.
1946 - $55.2 billion, 1951 - $45.5 billion.
1953 - $76.1 billion, 1957 - $76.6 billion.
Even FDR held the line: 1934 - $6.5 billion, 1938 - $6.8 billion.
and at a horrific cost to the U.S. in national security.
Coolidge spent $700 million per year on the military, compared to $250 million per year under Teddy Roosevelt, even though the general price level had only doubled.
If Teddy Roosevelt epitomized a strong funding of the miltiary, what does that make Coolidge?
And what was the horrific cost? The US failed to declare war on the rest of the world in the 1920's? Really Professor, are you now blaming Coolidge for the rise of Naziism, Stalinism, and Imperial Japan?
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