Speaking to an audience of veterans the day before he accepted the Republican nomination, Mitt Romney said of the looming sequestration cuts to the Pentagon budget: “The devastation will be felt here at home, where up to 1.5 million jobs could be lost. GDP growth could fall significantly.” And during his acceptance speech: “Trillion dollar cuts to our military will eliminate hundreds of thousands of jobs.”
Romney seems to understand well the fiscal crisis facing America, but his “jobs” and “GDP” focus in the debate over defense spending is incorrect. The correct size of the military budget for the defense of U.S. national security is an important and worthwhile discussion. But this economic argument is little more than a political pitch to particular group of voters. The large body of available evidence tells us that the economic and employment effects of military spending cuts are not relevant for policy choices, will not be significant in any event, and a reduction in defense outlays in fact may yield substantial benefits to the economy over the long run.
Politicians’ fearful response to the loss of military dollars in their districts is neither surprising nor inappropriate, but policy formulation should not be driven by it. Instead, the focus should remain on the future security environment and the defense budget needed to deal with it. Consider a rough analogue to national defense: private security services. If crime rates fall, the demand for private security services would fall as well. This would lead to increased unemployment among those working in that industry, an example of a “structural” economic shift, as price signals induce the owners of resources (including labor) to find their most valuable uses under changed economic conditions.
This process is difficult for those suddenly finding themselves out of work, but it is a necessary feature of a dynamic economy that maximizes productivity in the satisfaction of consumer preferences. That is why no policymaker should ask whether a change in the international security environment that allows for a smaller defense budget will yield more unemployment. The appropriate policy questions are about the prospective threats to national security and about the defense outlays needed to confront them.
No comments:
Post a Comment