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!