Obama is being pulled in a number of directions. According to the Boston Globe, the Defense Business Board, a government board stocked with business minded civilians, he should cut spending at the Pentagon. This would, by the way, be bad news for Joe Courtney, because according to the Board, submarines are among the wasteful military projects:
Such cuts would affect the New England economy. General Dynamics builds warships and submarines in Maine and Connecticut, while Raytheon, Massachusetts’ largest employer, is involved in numerous weapons programs from ships to missile defenses and satellites.
Pentagon insiders and defense budget specialists say the Pentagon has been on a largely unchecked spending spree since 2001 that will prove politically difficult to curtail but nevertheless must be reined in.
Paul Krugman recommends more spending on public works projects. In fact, he says, when in doubt, spend more:
The economic lesson is the importance of doing enough. F.D.R. thought he was being prudent by reining in his spending plans; in reality, he was taking big risks with the economy and with his legacy. My advice to the Obama people is to figure out how much help they think the economy needs, then add 50 percent. It’s much better, in a depressed economy, to err on the side of too much stimulus than on the side of too little.
There is a measure of consistency lurking behind what appears to be contrary positions.
Since Saint Ronald appeared on the scene, spending on public works has stagnated, while spending on the military has increased. Since September 11th, the military has been spending money like I would if you gave me a free buying spree in an Apple store. The fact that most of this spending will be of zero use in the “war on terror” matters not a jot. In effect, military spending has for years been the only politically respectable form of public works expenditures.
The problem is two-fold. First, military spending gives you less bang for the buck as far as job creation is concerned. Second, and most important, it gives almost no return. As Krugman points out, the very limited public works spending during the Depression constituted an investment from which we still reap benefits:
To this day we drive on W.P.A.-built roads and send our children to W.P.A.-built schools.
Military spending is somewhat akin to building pyramids. It creates jobs, but it does not create wealth. It has the added disadvantage of not even leaving something awesome behind, as the pyramid builders did.
If we’re going to run up deficits to stimulate the economy, we should spend money on things that we actually need-things that will yield a return over the long term. Spending money on infrastructure, for instance, as Al Gore is suggesting, serves two purposes. In the short run it creates jobs and stimulates the economy; in the long run we have something tangible that continues to yield dividends for many years. What’s amazing is how cheap some of these investments are in comparison to the obscene bank bailout. Gore says we could get a modern nationwide electrical grid, with energy derived from clean sources, for $400 billion. Even if you assume the near worst and double that, it would cost only $800 billion dollars (with an approximately 25% per year return on investment). Compare that to the $700 billion banker bailout for bang for the buck, not to mention the 2 trillion dollar illegal bailout going on behind the scenes.
Here in Southeastern Connecticut we rely (although not as much as in the past) on the submarine building industry. The Defense Business Board is calling our entitlement to government handouts into question. The dirty little secret is that it’s very hard, in today’s world, to justify the number of submarines we have, and the number we are planning to build. The primary function served by this sub building program is job creation. If we transfer unnecessary military spending to the civilian sector it might cause short term disclocations in areas like ours, but it’s a price we may have to pay to rationalize the way we spend our money. After all, all of this money will be borrowed in the short term. It makes no sense to borrow money to buy things we don’t need.
