Could Significantly Upping Defense Spending Help the Economy Recover?

[Gokul43201]

It is, however, relevant to whether upping defense spending would be a good idea.

But that is beyond the scope of this thread.

You can't ignore an aspect just because it works against you.

Au contraire, you ought to ignore it, as it is off-topic. The thread topic asks very specifically about the economic benefit of changes to defense spending. All other issues are irrelevant.

 

[CAC1001]

Please give some decent documentation for claim 3). I doubt that you can substantiate it.

When I wrote that, I was thinking to the expressway in Philadelphia, PA, where if I am remembering right, there was some part of it where construction had been going on for years. I don't have documentation for it however.

BTW, I'm not saying investing in infrastructure is a bad thing, I was just pointing out what I would see as possible problems in doing so.

 

[turbo]

When I wrote that, I was thinking to the expressway in Philadelphia, PA, where if I am remembering right, there was some part of it where construction had been going on for years. I don't have documentation for it however.

BTW, I'm not saying investing in infrastructure is a bad thing, I was just pointing out what I would see as possible problems in doing so.

Please give a well-referenced instance of when a public works project has been going on for years, sucking up taxpayer money. It's a common complaint of the right, but there is no evidence in support. Bring it on.

 

[Evo]

Please give a well-referenced instance of when a public works project has been going on for years, sucking up taxpayer money. It's a common complaint of the right, but there is no evidence in support. Bring it on.

Let's not drag this off topic. To think that there has been no corruption is extremely naive. turbo, you are aware that the cement industry was controlled (at least in NY and NJ) by the mafia in the not so distant past?

 

[cronxeh]

DeFoe company in NYC. Enough said.

 

[apeiron]

But that is beyond the scope of this thread.

Au contraire, you ought to ignore it, as it is off-topic. The thread topic asks very specifically about the economic benefit of changes to defense spending. All other issues are irrelevant.

The economic equation has to include the opportunity cost impact of not spending that money in other potential areas of society.

 

[Jack21222]

The thread topic asks very specifically about the economic benefit of changes to defense spending. All other issues are irrelevant.

If that were the case, the thread would have had one reply, containing one word, "yes." Even though it wasn't explicitly asked, there is an implicit question of "is it the best way?"

 

[turbo]

If that were the case, the thread would have had one reply, containing one word, "yes." Even though it wasn't explicitly asked, there is an implicit question of "is it the best way?"

True. There are advantages to improving infrastructure like roads and bridges, as opposed to defense spending. Job-creation for infrastructure projects is very diffuse, geographically and demographically. You get jobs for surveyors, engineers, planners, equipment operators, laborers, truck drivers, suppliers, etc, and they all spend paychecks wherever they live. And that can happen all over the country with positive effects everywhere. There are such projects on the books all over the country that are not being worked on simply for lack of funds, and they can be kicked into gear in a relatively short period of time.

How does that compare to building a few new ships or some fighter jets that no longer have a relevant mission? That helps a few workers in a few locations. The benefits are not wide-spread and can take years to ramp up in any case.

 

[ThomasT]

How many shot-in-arms does it take before we really have an economic IV?

How many shots in the arm has the general (the real) economy gotten? None. And, it's not going to get any. Upping defense spending will help a relatively small group of people for a short time. Period. The point being that the general economy is still quite strong. And, it will remain strong for the foreseeable future. And this is at least one reason, maybe the main reason, why the current group of politicians who control the direction of the US will do nothing to help its long term prosperity.

Given demographic and economic trends, and a general lack of commitment to alternative energy sources, the distant future doesn't look bright for the US.

 

[turbo]

While it's important to keep people from falling into poverty (extension of unemployment benefits comes to mind), it is far more important to provide enough stimulus to create jobs. That's why I would like to see lots of large highway infrastructure projects financed. Not only do people get jobs and paychecks, when they spend that money, other people get jobs, more hours at their own jobs, and more pay. Finance a multi-year project to replace a crumbling bridge and you not only employ all the people responsible for planning, engineering, and building the bridge, but the money they and their families spend employs pizza-makers, hairdressers, filling-station operators, salespeople... it goes on and on. The fact that such projects can happen all over the country make them a nice option, as opposed to highly-concentrated defense spending. Maine has Bath Iron Works (shipyard) and some facilities that make gas turbines for the military, but our state's economy would be far better-served by upgrading roads and bridges all over the state.

We have lost sawmills and paper mills in the economic downturn, and the tourism sector is suffering badly, as is commercial fishing. An infusion of construction jobs would not only help stimulate our local economies; the improved infrastructure would position our industries well for a (hoped-for) coming bounce.

 

[Evo]

Maine has Bath Iron Works (shipyard) and some facilities that make gas turbines for the military, but our state's economy would be far better-served by upgrading roads and bridges all over the state.

I may be wrong, but I thought only the interstates were funded with federal money, all other roads, bridges, etc... came from state funds. That's why Kansas has excellent roads, but the second you cross into Missouri, it's all potholes & disrepair.

 

[CAC1001]

True. There are advantages to improving infrastructure like roads and bridges, as opposed to defense spending. Job-creation for infrastructure projects is very diffuse, geographically and demographically. You get jobs for surveyors, engineers, planners, equipment operators, laborers, truck drivers, suppliers, etc, and they all spend paychecks wherever they live. And that can happen all over the country with positive effects everywhere. There are such projects on the books all over the country that are not being worked on simply for lack of funds, and they can be kicked into gear in a relatively short period of time.

On paper, it should be able to, in practice, I don't know about infrastructure spending's stimulative effects (Japan built a lot of infrastructure for example).

How does that compare to building a few new ships or some fighter jets that no longer have a relevant mission? That helps a few workers in a few locations. The benefits are not wide-spread and can take years to ramp up in any case.

Well a few things:

1) It wouldn't be just a "few ships or fighter jets," I was talking about the stuff that does have a relevant mission.

2) I think it would depend on some things regarding the time to ramp them up. I think it would be just like with infrastructure; certain infrastructure could be ready to go immediately, other stuff could take some time.

3) I don't know if it would only help workers in a few areas, because the technology and parts and tooling involved in building such military hardware requires a lot of various businesses from around the country I'd think. You'd have everything from various small manufacturers to suppliers and so forth.

4) If defense spending for stimulus would only help the economy to a limited degree, then one could try combining it with other forms of stimulus (supply-side stimulus by say cutting the corporate tax rate (ours is pretty high)), increase aggregate demand through demand-side tax cuts, maybe mail large checks to people as well, or infrastructure projects as you said.

 

[CAC1001]

I may be wrong, but I thought only the interstates were funded with federal money, all other roads, bridges, etc... came from state funds. That's why Kansas has excellent roads, but the second you cross into Missouri, it's all potholes & disrepair.

Yes, roads, bridges, etc...are state. Much of the Obama stimulus went to the states with this goal in mind from what I understand (spend it on infrastructure), but instead it seems the state governments have squandered it on their bureaucracies. Which I think is one of the flaws with infrastructure spending: how exactly to make sure the money goes to the actual infrastructure projects and doesn't get squandered along the way?

 

[turbo]

I may be wrong, but I thought only the interstates were funded with federal money, all other roads, bridges, etc... came from state funds. That's why Kansas has excellent roads, but the second you cross into Missouri, it's all potholes & disrepair.

It's not that federal money can't be used for state roads, bridges, etc. It just is commonly not made available in sufficient quantity. We often vote on state bond packages that leverage federal funds for improving docks, roads, etc.

There has been a plan in the works for years to build a new, high bridge across the Kennebec river in Skowhegan, to allow most traffic to bypass the downtown, but the money is simply not there. It would take heavy truck traffic out of the highly congested downtown, and allow for downtown businesses to have safer parking, pedestrian access, etc, but our state just can't justify the cost. That project would employ people for years, and revitalize the economy while improving public safety and improve the efficiency of heavy traffic that has to traverse those routes. Routes 2 and 201 cross in Skowhegan - the major E-W and N-S routes in this region, and all the traffic transitioning from one route to the other has to make right-angle turns at a really busy intersection on a fairly steep grade. Not good.

Neither the town nor the county can afford to finance a multi-million-dollar project like this, and the state simply doesn't have the money to pull it off, especially while tax revenues are down. If the federal government doesn't step up, the project will never be undertaken, despite the many long-term benefits that it would provide to citizens and local businesses.

 

[KalamMekhar]

The more money that is spent on R&D for weapon and gear systems to help create a better warfighter the better. There is no need to send our operators into battle with insufficient equipment.

The one thing that does make me angry, is phase 4 of the Army camo debacle.

Army Camo Phase IV

And so it begins…well actually it began awhile ago but Phase IV of the Army’s camo program is gaining steam and Natick in conjunction with PEO-Soldier released a Sources Sought Notice yesterday for camouflage patterns. SSD was also able to speak with PEO Soldier’s COL William Cole and LTC Mike Sloane about the situation.

http://soldiersystems.net/2010/06/30/army-camo-phase-iv/"

They really do not need to be spending more time than they already have on this to come to the same conclussions. All camouflage patterns blend in and look the same at 500m, and that movement and IR reflectivity are the largest issues in being detected.

It is time for the US Army to admit that the US Marine Corps. had it right with the CRYE pattern for its UCP.

 

[CAC1001]

Neither the town nor the county can afford to finance a multi-million-dollar project like this, and the state simply doesn't have the money to pull it off, especially while tax revenues are down. If the federal government doesn't step up, the project will never be undertaken, despite the many long-term benefits that it would provide to citizens and local businesses.

Would there be a way for the federal government to send the money directly to the town or county, or would it have to be funneled down through the state government first? If the latter, that is where I think one can run into corruption problems.

 

[turbo]

Would there be a way for the federal government to send the money directly to the town or county, or would it have to be funneled down through the state government first? If the latter, that is where I think one can run into corruption problems.

Why all the focus on corruption? Our state is populated by some pretty conservative folks and our state's elected officials are pretty open. We have never had a governor or chief legislator resign in disgrace or get indicted due to corruption charges, and there is not enough money involved in public service here to attract the creeps.

We need federal funds to get some of these projects underway because our state's finances simply can't supply the necessary money. If the feds granted a contract for a new destroyer to the shipyard at Bath, it would benefit a relative handful of people for another 4-5 years or so. Those aren't the people that are hurting here.

 

[CAC1001]

Why all the focus on corruption? Our state is populated by some pretty conservative folks and our state's elected officials are pretty open. We have never had a governor or chief legislator resign in disgrace or get indicted due to corruption charges, and there is not enough money involved in public service here to attract the creeps.

I'm talking about in general. Not all states are the same Plus government officials in general are not regarded as squeaky clean.

We need federal funds to get some of these projects underway because our state's finances simply can't supply the necessary money. If the feds granted a contract for a new destroyer to the shipyard at Bath, it would benefit a relative handful of people for another 4-5 years or so. Those aren't the people that are hurting here.

Would it benefit a handful of people, or just a handful of people in your particular area do you mean? For example I'd assume the only people in your area that would benefit would be the ones there who construct it, but what about all the parts and so forth required, I am sure that nationwide, there'd be benefits in other places too.

 

[turbo]

I'm talking about in general. Not all states are the same Plus government officials in general are not regarded as squeaky clean.

Would it benefit a handful of people, or just a handful of people in your particular area do you mean? For example I'd assume the only people in your area that would benefit would be the ones there who construct it, but what about all the parts and so forth required, I am sure that nationwide, there'd be benefits in other places too.

A relative handful of people in this state would benefit from a new destroyer contract, and those people work in south-coastal Maine - the area that has been least depressed by the poor economy.

If you're suggesting that defense spending is less-infected with corruption and deal-making than construction of highway infrastructure, I'm not convinced. If you want to build a new highway, it's going to take stone, gravel, concrete, culverts, guardrails, pavement, etc, etc. All that stuff is real and verifiable, and the contractors all know it, and when they bid on the contracts they are counting on their sources for all the materials and gauging the costs. I'd say that is a lot safer than relying on defense contractors to be above-board about costs and refrain from colluding with competing contractors.

 

[CAC1001]

If you're suggesting that defense spending is less-infected with corruption and deal-making than construction of highway infrastructure, I'm not convinced. If you want to build a new highway, it's going to take stone, gravel, concrete, culverts, guardrails, pavement, etc, etc. All that stuff is real and verifiable, and the contractors all know it, and when they bid on the contracts they are counting on their sources for all the materials and gauging the costs. I'd say that is a lot safer than relying on defense contractors to be above-board about costs and refrain from colluding with competing contractors.

I'd imagine there's probably corruption amongst defense contracting as well (although I don't know for sure, I don't see why not), and new projects can most certainly end up ballooning far beyond their initial projections in cost and so forth. That is why I only wanted money spent on replacing existing hardware that has already been developed.

When discussing corruption regarding highway infrastructure, I think it could be twofold: first, how to get the money from the federal government to the actual construction, and then possible corruption among contractors themselves.

I might be mistaken, but wasn't New Orleans for example given the money to build their levees up to withstand a more severe hurricane but never did, and thus when Katrina came through, the city flooded?

 

[Char. Limit]

One thing on the "corruption" argument...

If government is involved, corruption is massive. I'm sure it's provable, but I don't want to prove it.

 

[Antiphon]

New govt spending adds to the problem even if it's more benign like defense.

The whole world and especially the US Congress has borrowed so much money that it's now a question as to whether it can be paid back.

The world economy is a value-creating engine. When the world borrows money from it's own future but spends it on things that don't create more net money (like roads and tanks) then the future will have less money in it. That's where the world is right now, awash in debt.

The only answer is for the debt to be paid down by the wealth-creating sector of the global economy. This means governments have to reign in spending and yes, lay off workers if necessary.

This global economic trouble will be over when the global debt is paid down to between 3/4 to half of where it is now. More government spending is what created the mess. The sooner it stops borrowing, the sooner the debt can be retired.

 

[Office_Shredder]

How do roads not create money? The transportation of people and goods is a huge driving factor in the American economy.

I don't think it is at all obvious how government debt created the economic crisis. Obviously private debt destroyed companies, but most government were able to escape without much harm as far as I can tell. While the debt may (and probably will) be an issue in the future, it hasn't been an issue to this date

 

[Antiphon]

You're right it's not obvious. That's why the world isn't screaming for the debt to be paid down. The government is just another borrower, it has no special status in that realm.

The first rule of holes is stop digging the hole. Like every business and individual should know, you don't borrow money to pay bills. You borrow money when the thing you *do with the money* makes *more* money. Besides roads, the list of government spending that fits this bill is very very short.

Roads are necessary. Much of "social spending" is not. What's the payoff of paying farmers not to grow crops?

 

[mheslep]

Back at the height of the crisis / recession Martin Feldstein probably was the most prominent economist promoting this idea - increased defense spending - as the most effective way to actually stimulate, i.e. quickly recover the economy and create jobs. Feldstein was the chairman of the Council of Econ. Advisers under Reagan. I didn't like the idea, because I was sceptical of any kind of Keynesian spending if it is done solely for the purposes of economic stimulus, and now I'm more than sceptical. His article received wide review and you'll find rebuttals googling the title.

http://online.wsj.com/article/SB123008280526532053.html", December 24, 2008.

Feldstein's main point goes to addressing one of the main criticisms of stimulus spending (also made by Keynes), in that it is difficult to move the allocated government funds out into the depressed economy fast enough. See for example that large chunks of the 'Recovery' money will not be spent until 2011 or even 2012. His arguments:

• Defence spending can be fast via actions like immediate troop increases using two year enlistments that perfectly fits the time line.
• Acquire the components/materials for ship and airplane construction now, hold them in inventory until later in the construction process. Single shift production lines move to two.
• Replace the parts and munitions stocks depleted in Iraq (immediate impact).

etc.

 

[heusdens]

The typical problem with military spending is that is a waste of resources and talents, since the military production is only usuable as a destructive force, so in fact it is double inproductive.

Yet, in a capitalist society, private enterprises can still make profits out of this, not only in producing those goods, but also in contracts for "building up" the things that were with military force shot down.

We could do that in a much simpler fashion, without causing any person to be injured, I guess. Give someone a hammer and pay him for demolishing every glass window he sees. It will create many jobs, cause all those windows must be restored.

But is it usefull?

I have some other suggestions:

Built on a global scale large solar plants (Concentrated Solar Power) in areas that are threatened to become or are already desertified, that creates thousands or millions of jobs, creates cheap sources of renewable electric power that with DC lines can be economically transported thousands of miles, and can also help improving the soil beneath those plants (which get more shadow = less evaporation) and the plants themselves can use the accesss heat for desalinating salt water into drinking water for (drip) irrigation, so you can turn the soil into agricultural land in the course of time.

More land to feed the hungry, many jobs for poor nations that need economic development, and plenty of renewable electric energy at affordable prices (which can be used also to electrify car transporation and help us get off oil).

Why not?

See also (Google on those keywords)
- Plans of Desertec EU-MENA to install CSP plants in North african desert and the Middle east
- Plans of sub-saharan africa to create a green zone to fight desertification extending from Senegal in the west to Ethiopia in the east.

 

[AlexES16]

The idea is to create jobs on a large scale, I don't think that would quite do it.



How will spending money on waste-handling or recycling stimulate the economy?



The technology doesn't exist yet.



It's to be temporary spending, healthcare is permanent spending. Also, healthcare spending isn't going to create jobs as I see it. Finally, people could afford to buy their own healthcare fine if government would apply some of the means to fix the private-sector healthcare system I'd think.



How is providing for the national defense not useful?

Tipic Capitalist thinking

 

[hagopbul]

as long as there is a privet arms companies the economy want be healed

 

[Char. Limit]

as long as there is a privet arms companies the economy want be healed

The economy does not want to be healed. Economies are not sentient, and therefore do not want.

 

[brainstorm]

To me the point of economics isn't to keep people busy, but consumption-driven job-creation economics seems to be about little more than that. Military activity has throughout history provided people (usually men) with organized labor, discipline, and conflict to keep them busy (or reduce their numbers - either as "collateral damage" or probably intentionally at times). It also has the function of promoting freedom by repressing the abuse of freedom. In other words, if people are unemployed or underemployed, they're less likely to misbehave (engage in criminal or terrorist activities, for example) if there is a military or police threat of retaliation.

Repressing freedom through military and police actions probably has positive as well as negative effects but the issue is how this method of regulating freedom compares with job-creation and consumption-driven economic discipline. Is it better to keep people occupied in consumption-driven servitude so they won't misbehave or allow them more freedom but police them militarily against abusing it?

 

[CRGreathouse]

You're right it's not obvious. That's why the world isn't screaming for the debt to be paid down. The government is just another borrower, it has no special status in that realm.

It has a very special status: it can print its own money.

 

[mugaliens]

It has a very special status: it can print its own money.

Not without diluting it's value...

 

[talk2glenn]

It has a very special status: it can print its own money.

This is a pervasive myth.

The government cannot "print" money - it can confiscate it (taxation), or borrow it (bonds).

If governments cannot find willing lenders to purchase its bonds, it can combine the two schools, forcing anyone who holds its currency to lend it cash. This is what we are talking about when we refer to "printing money" - if the government expands the money supply by 10%, it has effectively borrowed 10 cents out of every dollar previously in circulation.

Governments do this when they lack the resources or authority to effectively collect the 10 cents through direct taxation (transitory and/or weak governments, predominantly).

The only difference between issuing new currency and issuing bonds is consent.

 

[mheslep]

This is a pervasive myth.

The government cannot "print" money - it can confiscate it (taxation), or borrow it (bonds).

If governments cannot find willing lenders to purchase its bonds, it can combine the two schools, forcing anyone who holds its currency to lend it cash. This is what we are talking about when we refer to "printing money" - if the government expands the money supply by 10%, it has effectively borrowed 10 cents out of every dollar previously in circulation.

Not necessarily. The value of the dollar is set on a world market, based on several factors including the US GDP, balance of trade, and the outstanding debt of the government. If the US economy grows (GDP grows) by X without an corresponding increase in debt, then the government can simultaneously circulate more dollars without decreasing the value of the dollars held be the public.

 

[talk2glenn]

Not necessarily. The value of the dollar is set on a world market, based on several factors including the US GDP, balance of trade, and the outstanding debt of the government. If the US economy grows (GDP grows) by X without an corresponding increase in debt, then the government can simultaneously circulate more dollars without decreasing the value of the dollars held be the public.

You're on the right track, but you're missing a key point.

If gdp grows by x without any corresponding change in # of $s, then fewer dollars are chasing more production. This is what we call inflation.

If government expands the money supply at a rate equal to the rate of change in gdp, it returns the currency to its prior value, effectively borrowing the difference.

Sorry I am typing this on a mobile phone.