U.S. Military as Economic Bedrock

I read a lot about money. I have very little of it, but I like to read about it because it makes me feel like I have more of it than I actually do. For people who like to read about money, the last four years have been incredible. For the first time in many years, money is front and center in our national political debate. It use to drive most political conversations pre-social issues politics, but money became this very complicated, boring thing to most people who didn't want to retake high school economics to participate in a political screaming match. So, the new topics of conversation became abortion, capital punishment, gay people, etc.

Now, we're back to money. Yay! Specifically, our country is talking about two things: 1) Unemployment (basically as an indicator of economic growth). 2) The national debt. These two things are often at conflict in this discussion because a move to solve one issue negatively effects the other. If we cut spending to solve our debt problems, public sector employees will lose their jobs. If we keep spending to help create jobs, we operate at deficits and the debt rises. Anyone who knows anything about economic history, and understands the basic idea that doing the exact same thing over and over again will get you the same results, knows that cutting spending in a struggling economy makes a bad situation worse. Ask Great Depression scholar and Chairman of the Federal Reserve Ben Bernanke or his pal Paul Krugman. It's not opinion when it's historic fact.

This would seem to imply that the U.S. is fucked in the most paradoxical way--a no-win scenario. But that's not the case. First off, national debt is wildly misunderstood and isn't as pressing an issue as people believe, though it is something the U.S. needs to think about long term. But inside this large debate taken on by economists, politicians, and even regular Joe's like myself, is a middle ground that too few see. Krugman and people left of center tend to believe that solving the short-term unemployment problem now and attacking the national debt when the economy is back on track is the right thing to do. Economists and politicians right of center tend to think that cutting spending, taxes, and regulations now is the answer to both the long and short-term problems. I'm more inclined to agree with the left of center approach since so many are employed by the public sector and the private sector often works to harshly cut costs to reward shareholders at the expense of employees. Top that off with the realization that employment is so tightly tied to every aspect of government spending, and it seems like spending is the only option in the short term.

But what I've really been thinking about is a big chunk of the budget that I feel goes unmentioned too often. The Left sometimes mentions it. The Right hardly ever does, and the center ... well the center is too busy watching teenage pregnancy, marry a midget, dance with a celebrity reality shows to know what the hell is going on. That chunk is the defense budget. It actually serves as a terrific example of how spending in the short-term, even if it feels misguided, is what's best for both the long and short future of the U.S.

The 2011 U.S. defense budget was just over $680 billion--yes, Wikipedia is reliable enough for a guy who eats a lot of canned raviolis. As the chart below shows, that was a whopping 58% of discretionary spending (a fancy term for money spent at the government's discretion or money they don't have to spend but choose whether and how much to, as opposed to entitlement programs which are mandatory).

So, according to this chart, we spend more discretionary funds on defense than all other areas combined. Of course, defense is important, and this $680 billion is actually down from over $700 billion in 2008. But maybe the word "defense" isn't all that accurate. "Defense" implies we're defending ourselves from something. Our defense budget isn't really dealing with defense so much. In fact, there hasn't been a military attack on U.S. soil since Pearl Harbor (I'm not counting 9/11 because in my estimation, it was a terrorist attack, which falls under the purview of domestic law enforcement agencies like DHS, FBI, ATF and so on. Those are not part of the defense budget). "Defense" is a term meant to  change the perception of what this spending is for. It's not really for defense; it's for offense. Politicians call it defense, but maybe it's more accurate, like the organization that made this chart, to call it "military spending."

Naming this spending is important because it lies at the heart of the issue here, which is really a question as to why we need all this military spending. The U.S. outspends almost every country in the world combined on the military.

The U.S. spends six times what China spends the 2nd largest military spender. That is incredible to me, especially considering their population is four times the U.S.'s. According to Visual Economics, the U.S. military budget his more than Spain's entire federal budget. My big question is why? Why do we need to spend more than almost every other nation combined to "defend" ourselves? 

The obvious answer, we don't. But the big twist is this. We don't need that money to defend ourselves, but we do need to spend that money. We need that money to help drive the U.S. economy. Any type of drastic military cut would negatively effect the economy. We built up a large military presence during and after WWII when doing so helped the economy out of the Great Depression. Now, that large money pit helps drive many different industries, weapons, steal, food, etc. It also employs millions of soldiers and civilians. 

Oddly, during the Iraq War, a boost in military spending only increased the national debt without helping the U.S. economy, as unemployment wasn't an issue. The U.S. had tapped out the maximum return on military as economic stimulus and was simply wasting money at that point, driving the national debt higher and higher.  

The take away is that there are not easy answers. No magic bullets. This realization brings us back to square one. The military is about to be asked to cut its spending drastically, and even the cut-spending Republicans think this is a bad idea. I don't know of anyone who thinks this is a good one. In better times perhaps it will be easier to cut defense spending without harming the economy. I think it will be. But for now, it's got to stay the way it is, not to defend us from an exterior foe but to defend us from economic collapse. 

So, the answer then seems to be as Krugman and the left of center crowd said it should be. Do not cut spending when the economy is struggling. People might say well you can cut spending that doesn't effect jobs. The problem is there is no such thing. If you cut back research and development on weapons systems, those people doing that lose jobs. If you cut back weapons manufacturing, they lose jobs and the steal industry loses jobs. If you cut back troop levels, they lose jobs. You cannot make significant cuts without losing jobs. Everything in this economy is so tightly connected. 

The part of me that hates to see us throw money away finding better ways to kill each other hates that we spend so much on the U.S. military. But the part of me that wants the economy to thrive again knows this beast must be fed to produce milk. It's just funny to me how the U.S. military's greatest contribution right now comes from a ledger and not a rifle.