Spending Surge: Defense Stimulus as Economic Second Coming

With a troubled economy and tanking financial, job and housing markets, a slowdown in defense spending now seems unlikely.

In fact, at a time when “stimulus” is the new black, defense spending could act as an economic stimulus. This concept (though many have thought of it) appeared in a Wall Street Journal op-ed Dec. 24 (holiday cheer?) and in a number of print and broadcast outlets since.

Harvard economics professor Martin Feldstein says the planned decrease in defense spending is exactly the wrong answer, despite the fiery orations of lawmakers earlier in 2008. If there is a stimulus, he says, then further stimulate defense. (With or without double entendres, defense fat cats probably would prostrate themselves before this money messiah.) Feldstein calls for spending increases in 2009 and 2010 with a decrease in 2011, when he thinks the economy will return to solvency. While this may be true, our guess is these increases may continue longer: What one giveth to DoD, one is loathe to take away.

Feldstein envisions a spending surge in procurement and research that he pegs at $20 billion. He also sees a 5 percent increase in operations and maintenance money. Throw these dollars and contracts in the air and down fall 300,000 new jobs, a number that may be optimistic. The cats may be fat, but they are smart and may hire as few as possible. Once this gravy train stalls, many of these workers will be pounding the pavement again, though in a post-stimulus world, the workforce should be able to absorb them.

The former advisor or President Ronald Regan is calling for increasing the capacity of industry, almost to what one would characterize as war-time production. Ships? Aircraft? Spending orgy? Sure there would be inefficiencies and waste, but it would get people working. There already are tremendous inefficiencies going into his proposition. To what degree do they skew this model?

He talks about increasing the size of the armed forces. While it would get more people working, the resulting military may not be what the nation needs. Would the pain and expense of a drawdown be far down the road?

Feldstein calls for similar investment in the Department of Homeland Security, the FBI, and much of the intelligence community.

Belly up to the bar, boys, the stimulus siren beckons.

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