Economy

The Humvee and the Bus: Why Not All Public Spending Is the Same

Military capital spending is one of the least productive ways to use public funds because it has relatively few spin-off benefits.

One of the things to keep in mind as we start pouring money into public works is that not all money spent on capital items has the same results. For example, a Humvee provides employment for the workers who build it and the community that benefits from their employment. It also provides jobs for those who supply it with parts, but since the soldiers who use it would still be soldiers whether it was there or not, you can't really add them as benefits. Once it's overseas, many of its ancillary benefits (such as needing fuel) disappear from the domestic economy. When, however, the Humvee gets blown up in Iraq, you can fairly add the cost of hospitalization and/or burial of the crew and subtract from the economy the transfer of some of these dead or injured troops from being productive parents to becoming a drain on their families and subsequently the economy.

Now let's take the same amount of a money and put it into an urban bus. The bus will have all the initial benefits of production but probably have a much longer lifespan and will contribute directly to the economic benefit of each rider who uses it to go to and from work or shopping. Marines don't go shopping in their Humvees. In other words, a stronger daily economic contribution for a longer time. Better yet, if the bus is not just a replacement along an existing line but part of a new exclusive bus lane system in some city, the benefits will be even greater as now we have this vehicle helping to attract new business and residents along its route.

This is just a rough example of something about which we don't talk enough. Military capital spending is one of the least productive ways to use public funds because it has relatively few spin-off benefits, is often short lived, and largely serves a community that would be there with or without it.

If you take a look at Obama's public works plan, it suffers from some of the same problems. Clearly many of our roads and bridges need repair, but this is a separate issue from the question: what are the best public works projects to spur the economy? Improved energy efficiency is also important but that doesn't mean that it is always the most efficient way to produce new jobs.

Strikingly absent from the Obama plan at this point, for example, is rail. Not the high speed systems that Biden and others would like which would largely benefit elite intra-city commuters, but a program that would make railroads as important in this country's transportation system as they are in a vast number of other countries. Included could be mass transit built in the median strip of some of the highways the Obama administration plans to repair or conversion of some of the lanes to exclusive bus service.

Here are a few of the bonus stimuli possible from such an approach: new opportunities for Detroit if it switched some of its auto work to railroad cars. Additional economic opportunities for the large number of people using the new system. And most importantly, new business and residential development along the new routes.

This is just a rough sketch offered not as a definitive answer but to illustrate the sort of thinking that should be happening and isn't.

Sam Smith is editor of the Progressive Review.
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