June 22, 2012
Readers of an article that highlighted a study by the National Association of Manufacturers warning of the loss of nearly 1 million jobs due to cuts in military spending are undoubtedly asking this question. They no doubt remember a plan cooked up by the paper’s publisher, Katherine Weymouth, to sell lobbyists access to its reporters at dinners at her house. This article essentially lent the paper’s authority to a completely misleading study.
The basic story here is very simple, when you are in a severe downturn any spending creates jobs. If we spend money on schools and hospitals that creates jobs. If we pay people to dig holes and fill them up again, it creates jobs. And, if we pay people to build weapons for the military it creates jobs.
There is nothing magical about military spending in this story. In fact, research that was not paid for by the National Association of Manufacturers shows that military spending actually creates fewer jobs per dollar than other types of government spending.
When the economy is not in a downturn, then military spending destroys jobs. An analysis done for CEPR by Global insights showed that a long-run increase in military spending of 1 percent of GDP (roughly the amount spent on the war in Iraq in its peak years) would reduce the number of jobs by almost 700,000. The hardest hit sectors would be construction and manufacturing.
If the Post wanted to inform rather than mislead its readers, it could have just run a piece pointing out that cutting government spending at this point in the business cycle will cost jobs. (Raising taxes will also cost jobs, but not by as much, especially if the tax increases target higher income people who would not change their spending much in response to a decline in disposable income.)
In short deficit reduction right now will cost jobs. The politicians in Washington may not understand this fact, but the Post’s reporters and editors should.
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