Military Spending and Economics

There was news this week, that the secretary of defense, was proposing that we draw down our military forces to pre-World War II levels. It might be interesting to consider the effect that this might have on our economy, rather than the defense readiness of the United States.  Not that defense readiness is not an important factor.

Of course, different sides of the political spectrum,  have different opinions on whether or not this is a good thing.  But just how will it affect the overall economy  of the United States.  While the military employs many people as soldiers and has civilian support  personnel drawing down those forces  can affect the overall unemployment rate in the nation.  They were also considering  eliminating at least one airplane from the arsenal.  And I'm sure there are weapons systems that they are either considering slowing down production  or canceling altogether.  The workers employed to build or upgrade weapons systems will obviously be affected.  Profits of the producers of the systems will also be impacted.  So drawing down the military  which is a major part  of the annual  United States budget will have some effect on our economy.  It is, however, my opinion,  that the government is not large enough  to have a major affect on the general economy.  Which is why as a general rule  we oppose Keynesian economics.

It is important to note, however,  that our economy is currently weak,  and in his weakened state is more likely  to be affected.   In the past, build up military forces, and wars  have caused
our economy to strengthen.  As an example, World War II  brought us out of the depression that began in 1929.  Since World War II, and with the onset of the Cold War, it was military production that finally put people to work, and incomes rose.  When you add the number of able bodied men that went to Europe and the Pacific, we neared full employment.




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After the war, the United States was the only major country that had not had major infrastructure disruptions from the war.  Europe was a mess, as was Japan and, to a degree, China.  That was the time when the military should have been drawn down, but the Cold War started almost as the Hot war ended.  The military became a way, along with world consumers that we had the decade of the 50s and even into the 60s before the world caught up.  Most countries were willing to let the US and USSR be the superpowers, they could roll back their defense spending and task that money to economic development.  Now Russia is a shadow of their former selves, and we are teetering.

So should we draw down?  Probably yes, but the timing is bad.  I am not sure if our economy can handle it.  As most people see it, our "recession" has not really ended.  The numbers may say otherwise, however, those that produce the numbers can affect them.  The unemployment number in particularly is not arrived at the same way as in the past.  Labor force participation is in the toilet, and inflation is lurking around the corner. Just look at local shopping centers, how many have empty store fronts?

We need to push our resources toward economic development.  We need to adjust the way we tax to encourage investment.  Once that happens, we can protect ourselves, and let the rest of the world do the same.  The time that America has kept the world safe must end.  We are not an empire, and I don't think most Americans would want us to be.  Did not China keep to itself, their own self defense after Korea.  Now look at what they are doing economically.  And that is with a very inefficient government system.  Just think how well we could do if the government lived within their means and did not confiscate so much of our economic wealth.

Spend Wisely!

Its Crazy, Just Crazy!

Sometimes when I write, there seems to be so little out there, it seems I have to search for something that intrigues me, and I feel can be written about.  Lately, I've been on overload, and blocked because there is so much.

So let's do some quick hits.  First the Affordable Care Act (it's real name, not Obamacare).  It really didn't surprise me a lot about all the web site problems, or other problems after people enroll.  The goal of this legislation was not to provide affordable care, it wasn't so you could keep you plan or doctor, or any of the other minutia.  It was all about control.  It was, and some said it up front, a move towards single payer systems as they use in countries like Britain, and Canada.  But knowing that there would be backlash from the center, as well as the right, meant that it would not pass.

The shrinking middle class.  For more than a decade, it seems there has been pressure on the middle class.  It is not tax policy, although that is part of it, it isn't laziness on the part of the people. It is rather the loss of traditional middle class jobs to developing countries.  And part of that is because of labor unions, and part is because of corporate greed, and part is because we as consumers don't care.  All we really want is cheap stuff.  Until that mood changes, and we demand value, the middle class will continue to shrink.

Lack of local and small startups.  Drive through your town, and look at the strip malls and shopping centers.  Note all the empty businesses.  There is no concerted economic effort from Washington, to State Capitols, to City Halls to build that base.  Our system seems to be broke, there is no leadership from our politicians, as long as they get paid, it seems they don't see a problem.



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Unemployment.  This is still a massive problem.  Food Stamps are way up, disability claims are way up, which means people are losing income.  Without their required income, how can we keep our houses up, buy new cars, or even eat out?  Recently Joe Biden was touting the stimulus of several years ago.  Yet work force participation is way down over traditional levels.

Inflation.  What no one seems to be talking about.  The price of gas is up.  The price of hamburger is up.  The cost to heat and cool our homes is up.  Salaries are stagnant.  Inflation will continue, it has to if government wants to keep borrowing, and the Fed seems obliging.  Isn't less income through wage stagnation and inflation an unwritten tax?

Green energy companies, despite government props are failing.  It seems the government feels they can encourage things that the people don't want in big enough quantities to make them productive.  I love electric cars, but would not buy one because of the range and lack of infrastructure.  Besides driving to the store or work, occasionally we like to vacation, usually by car, that would be difficult with a Chevy Volt.

People are mad.  I like to read comments after a story I read.  But it seems everyone is mad.  Teabaggers this, Obummer that, there is no civility on either side of any issue.  There is a claim that there is a large middle that can go either way, depending on perception, how do they expect to educate people to their way of thinking?  It is dialog, and decent debate that will move us forward, not partisan bickering.  And before you say your side isn't bickering, look at the comments.

Taxation.  Believe it or not, we are taxed much much more than King George ever taxed us.  And we kicked him out of our country through revolution.  Yet without the high taxes government is levying, there is no money to buy votes at election time.  And we are all bought.  Every cycle, your congressman runs on what he has done for his or her district.  That money comes from taxes.  Our founders worried about taxes, and wrote the Constitution such as that it took an amendment to institute the income tax.  And that was just about 100 years ago.  Which seems to correspond to when the decline began... coincidence?

Racism.  The real racists are the politicians who pander, but never solve the problems.  And this racism is preventing minorities from finding good jobs, so they can move to the middle class.  It is the loss of middle class jobs that encourages this racism.  I wonder when the people affected by it will demand their representatives do something about it, rather than just campaign on it.  Yes racism is brought about by economics, or at least bad economics.

So what is a body to do?  We need to reengage in the political process.  Stop voting on autopilot.  Demand at town halls real answers to questions, not sound bites.  Let them know it is not about them, it is about you.  Don't be afraid.  If you have a middle class job, don't assume you will lose it.  Keep your attitude up.  Use your income to be happy, because that's when things will start to turn in spite of the politicians.

In the last century there were two pretty good Presidents economically.  One said "We have nothing to fear, except fear itself"  and the other said "I see America as a shining city on a hill..."  We need leadership like that once more.  Are you one?  Please run!

Spend Wisely!