Monday, November 16, 2009

Military Spending Weighs Heavily on Bloated Budget

Research Shows That it is Robbing Jobs From the Private Sector Too

With the National Debt about to exceed $12 Trillion (which will require Congressional approval), major budget cuts will most certainly ensue and significant tax hikes won't be far behind.

But much of the federal budget is mandated by law — the product of Social Security and Medicare — or is otherwise non-discretionary, such as interest payments to holders of the U.S. debt.

The War Research League performed an analysis of the “Analytical Perspectives” book of the Budget of the United States Government, Fiscal Year 2009.

It found that 54% of federal spending is allocated to the military. This includes veterans spending, the cost of the "war on terror", as well as the cost of two concurrent wars.

The Center for Defense Information reports the military portion of the budget at 51%.

Either way, military spending represents more than half the federal budget.

The Center for Economic and Policy Research published an op-ed last week titled, Massive Defense Spending Leads to Job Loss.

The piece notes that defense spending removes resources from the economy, thwarting the free market. Defense spending is a direct drain on the economy, reducing efficiency, slowing growth and costing jobs.

A few years ago the Center for Economic and Policy Research commissioned Global Insight, one of the leading economic modeling firms, to project the impact of a sustained increase in defense spending equal to 1.0 percentage point of GDP. This was roughly equal to the cost of the Iraq War.

Global Insight’s model projected that after 20 years the economy would be about 0.6 percentage points smaller as a result of the additional defense spending. Slower growth would imply a loss of almost 700,000 jobs compared to a situation in which defense spending had not been increased.

Defense spending has now grown to 5.6 percent of GDP. By comparison, before the September 11th attacks, the Congressional Budget Office projected that defense spending in 2009 would be equal to just 2.4 percent of GDP. That's a difference of 3.2 percent. So, the Global Insight projections of job loss are far too low.

In fact, the projected job loss from this increase in defense spending is closer to 2 million. The analysis also projects a roughly $250 billion reduction in GDP due to defense spending. This is at the expense of the private sector.

Upon his departure from the White House, President Eisenhower so famously warned of the dangers of the Military-Industrial Complex.

Useless, unwanted, unwarranted, and unnecessary weapons systems are continually approved and appropriated. The entire defense-contracting industry has dedicated itself to forever increasing government spending on its assorted wares.

About $50 billion in defense spending (or about 7.5%) is now classified, or part of the so-called "black budget."

According to Aviation Week’s Bill Sweetman, this makes the Pentagon’s secret operations, including the intelligence budgets nested inside, “roughly equal in magnitude to the entire defense budgets of the UK, France or Japan.”

While America debates how soon we can bring home our troops from Iraq, it's worth noting that — more than 60 years after the end of WWII — the US still has more than 50,000 troops in Germany and 30,000 in Japan.

In fact, the US has over 500,000 military personnel deployed on over 700 bases, with troops in 150 countries — including 37 European nations.

As Ron Paul suggests, in this time of deep economic crisis, why not just bring them all home?

"We are bankrupt and cannot afford it," says the Texas Representative.

The truth is, he's right.

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