Cut Military? But What About the Jobs?

Pentagon spending is the least efficient way to create jobs. For every 100 jobs created by Pentagon spending, the same investment would create 251 jobs in education, 169 jobs in health care, or 147 jobs in clean energy1.

Job Creation Potential of $1 Billion in Various Sectors2

Asking the right question. If the question is how to create jobs, military spending is not the answer. Curtailing military contracts, without investments in other sectors, could result in some job loss. The demand for military production typically wanes in a post-war period and is, at all time, dependent on direct government spending and the preferences of political leaders. But government investments in growing sectors, such as health care, clean energy, and education can generate businesses independent of government spending and will yield far more good jobs than the military budget can promise. More jobs for the same price. Spending $1 billion on industries such as clean energy, health care, education, or even a $1 billion tax cut creates more jobs compared to the same $1 billion of spending on military production. This comparison includes the creation of direct, indirect, and induced jobs. The direct jobs are the actual jobs generated by investing the $1 billion. Indirect jobs are generated by the market demands of the emerging or growing industries that create the jobs such as suppliers. Induced jobs are the jobs created and supported by new employees spending their earnings, for example at the local grocery store.

Phasing it out. The Pentagon often changes its plans to develop or purchase new weapons and vehicles; manufacturing is phased out over a period of years -- not immediately. The concern about federal debt challenges Congress to be more careful about how it spends the nations resources, and may prompt Congress to curb military spending. If contracts are phased out, the changes will occur over time. The federal government is familiar with this experience. The Office of Economic Adjustment was created in 1961 to help communities strengthen their local economies when changes in military policy or production decisions result in job loss concentrated in a local area. This agency helps the community to mitigate the short term economic impact of Defense Department decisions by assisting with transition planning. The office offers technical and financial assistance and helps to coordinate local, state, and federal resources to support the communitys plan3.

The Next Step. In the National Defense Authorization Act for Fiscal Year 2012, H.R. 1540, the Office of Economic Adjustment was authorized for almost $49 million4. When compared to the overall Department of Defense outlays of $688 billion in 20125, the $49 million is not even a big enough to be one percent of the military budget (0.00712%). Increased funding could be increased for this existing agency could help communities move from unhealthy dependency on government contracts to more a robust and diversified local economic base.

Priorities in order. Although the unemployment rate is very important to consider in these hard economic times, it is not responsible fiscal policy to promote military spending as a job creator when it is so inefficient as a job creation engine. Like other spending, military spending should be matched to the actual needs of the nation. By focusing on areas of actual unmet need such as clean energy, better health care, and an improved education system, more good jobs could be created. A transition to civilian jobs will take some time, but the ten-year debt reduction window is an excellent time to begin. Valuable resources are being wasted in this struggling economy. Our resources should be focused on our real need for job creation. In the words of Warren Buffett, in a chronically leaking boat, energy devoted to changing vessels is more productive than energy devoted to patching leaks.

1 2

Project on Defense Alternatives. Commonweatlth Institute. http://www.comw.org/pda/111120pent-jobs.htm Pollin, Robert and Heidi Garrett-Peltier The U.S. Employment Effects of Military and Domestic Spending Priorities: 2011 Update. Department of Economics and Political Economy Research Institute (PERI), University of Massachusetts, December 2011. http://www.peri.umass.edu/fileadmin/pdf/published_study/PERI_military_spending_2011.pdf 3 Office of Economic Adjustment. Defense Industry Adjustment Program Overview. http://www.oea.gov 4 National Defense Authorization Act for Fiscal Year 2012, H.R. 1540.ENR. http://thomas.loc.gov 5 Office of Management and Budget. Analytical Perspectives. Table 33-1 http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/33_1.pdf

Contact: Ruth Flower, Legislative Director, Friends Committee on National Legislation 245 2nd Street NE Washington D.C. 20002 ** 202-547-6000 or flower@fcnl.org

March 2012

For more information related topics, look for fact sheets at www.fcnl.org/issues/budget