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Is War Good for the Economy?

Many mainstream economists argue that deaths, destruction, and expense they entailed, have a perverse silver lining.
 
 
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A British soldier walks near the Pimon military camp in Nad-e Ali district of Helmand province on March 25, 2010. Prime Minister David Cameron said Wednesday that Britain was paying a "very high price" in Afghanistan after three soldiers were killed in a

 
 
 
 

The 1960s comedy show Laugh-In included an occasional sketch in which co-host Dan Rowan played a comic general whose tag-line was "war is good for business!" In an ironic echo of that skit, an April 27 Washington Post story delivers the same message: "A steep slowdown in defense spending tied to the end of the wars in Iraq and Afghanistan is undercutting the country's economic recovery, new government data released Friday revealed." An 11.5-percent annual drop in Pentagon spending resulted in slower growth in the gross domestic product (GDP) during the first quarter of 2013 than economists expected.

So did the dozen years of war, with all the deaths, destruction, and expense they entailed, have the perverse silver lining of being good for the economy? Most mainstream economists -- who, like cynics, know the price of everything and the value of nothing -- would answer in the affirmative.

Gross domestic product, which they tend to treat as a surrogate for economic well-being, is only a tote board of all spending that occurs in an economy. Statistics like GDP are arbitrary, subject to incomplete data, and can mislead us about underlying economic conditions. A dollar spent on a cancer cure has the same worth to the GDP as a dollar spent to bribe an Afghan drug lord. This convention can reach absurd lengths, such as massive hurricane damage possibly increasing the GDP: money must be spent just to get conditions back to the way they were, but it counts it as "growth."

Based on my almost three decades on Capitol Hill, most of them involved in defense budgeting, I can say authoritatively that military spending evokes an almost mystical reverence among many members of Congress. A $325-billion defense program like the F-35, however technically flawed, typically engenders less floor debate than relatively miniscule domestic programs such as the Corporation for Public Broadcasting.

While politicians are notoriously prone to interpret data through the lens of ideology, the guns versus butter debate shows their cognitive dissonance at its most vivid. Republicans have made debt and deficit the centerpiece of their economic agenda, and their disdain for government spending makes for blistering GOP floor speeches. Their sole nostrum for recovery from the Great Recession has been austerity in the form of cutting government spending. But to paraphrase Nixon, when the subject is Pentagon spending, "they are all Keynesians now," and the GOP-led House has passed bills to exempt defense from sequestration.

Among Democrats, actually cutting defense, as opposed to theoretically being in favor of cutting it, is a difficult lift. And the idea that stagnating GDP might reflect defense cuts is now giving many of them second thoughts. Like all politicians, they are worried about jobs.

Military spending may at one time have been a genuine job creator when weapons were compatible with converted civilian production lines, but the days of Rosie the Riveter are long gone. Most weapons projects now require relatively little touch labor. Instead, a disproportionate share is siphoned into high-cost R&D (from which the civilian economy benefits little), exorbitant management expenditures, high overhead, and out-and-out padding, including money that flows back into political campaigns. A dollar appropriated for highway construction, health care, or education will likely create more jobs than a dollar for Pentagon weapons procurement. A University of Massachusetts study claims that several alternative projects would produce anywhere from 35 percent to 138 percent more jobs than spending the same amount on DOD.

During the decade of the 2000s, DOD budgets, including funds spent on the war, doubled in our nation's longest sustained post-World War II defense increase. Yet during the same decade, jobs were created at the slowest rate since the Hoover administration. If defense helped the economy, it is not evident. And just the wars in Iraq and Afghanistan added over $1.4 trillion to deficits, according to the Congressional Research Service. Whether the wars were "worth it" or merely stirred up a hornet's nest abroad is a policy discussion for another time; what is clear is that whether you are a Keynesian or a deficit hawk, war and associated military spending are no economic panacea.