Why Dishing Out Cash to the Pentagon Is No Solution for the Unemployment Crisis

It's the magic incantation to fix our economic woes. Many states and federal agencies have already gone from scouring their budgets for things to cut to green-lighting construction projects. The Obama administration's $787 billion stimulus package is sure to muster many shovels in an effort to rouse a despondent economy and put Americans back to work.

Here's the strange thing though: That package was headline news for weeks, bitterly argued over, hailed and derided in equal measure. And yet road construction, housing projects, and green retrofits aren't the only major projects getting the shovel-ready treatment via massive infusions of cash.

At the end of February, another huge "stimulus" package was announced but generated almost no comment, controversy, or argument. The defense industry received its own special stimulus package -- news of the dollars available for the Pentagon budget in 2010; and at nearly $700 billion (when all the bits and pieces are added in), it's almost as big as the Obama economic package and sure to be a lot less effective.

Despite the sort of economic maelstrom not seen in generations, the defense industry, insulated by an enduring conviction that war spending stimulates the economy, remains almost impervious to budget cuts. To understand why military spending is no longer a stimulus driver means putting aside memories of Rosie the Riveter and the sepia-hued worker on the bomber assembly line and remembering instead that the Great Depression came before "the Good War," not the other way around. In World War II, it's also important to recall, the massive military buildup was labor intensive, employed millions, and was accompanied by rationing, austerity, and very high taxes.

This time around, we began with boom years and spent our way into the breach, in significant part by launching unnecessary, profligate wars. Meanwhile, President George W. Bush cut taxes at a more than peacetime pace and borrowed like an addicted gambler on a losing streak to underwrite his wars of choice, including his Global War on Terror. If the former president's nearly trillion dollar (and counting) global war got us into this mess, by simple logic it's not likely to bail us out as well.

Riding the Slide to Billions

While the good times rolled during the long slide from surplus to deficit, from no war to global war, it wasn't just the Merrill Lynches and subprime mortgage giants that cleaned up. Lockheed Martin, Boeing, and Northrop Grumman -- the top three defense contractors -- had a ball, too.

In 2002, the first full year of what came to be known as the Global War on Terror, for instance, those three companies -- ranking first, second, and third on the Pentagon's list of top ten contractors -- split $42 billion in contract awards, more than two-thirds of the $67 billion distributed among the top 10 Pentagon contractors.

In 2007, the last year for which full contracting data is available, the same Big Three split $69 billion in Pentagon contracts, which was more than the total received by the top 10 companies just five years earlier. The top 10 divvied up $121 billion in contracts in 2007, an 80% increase over 2002. Lockheed Martin, the number one Pentagon contractor, graduated from a mere $17 billion in awarded contracts in 2002 to $28 billion in 2007. That's a leap of 64%. Given such figures, it's easy enough to understand how the basic military budget -- excluding money for actual war-fighting -- jumped from about $300 billion to more than $500 billion during the Bush years.

Given the economic climate, it's no surprise that the three defense giants have all posted losses in the past few weeks. But before the hankies come out and the histrionics start, it should be noted that Lockheed Martin alone has an $81 billion backlog in orders, enough to keep chugging along for another two years without a single new contract.