IPS Blog

Members of Congress, led by the team of Senators McCain, Graham and Ayotte, are touring military contracting plants, bases and defense-dependent communities this summer raising the alarm about “sequestration.” This is the part of the current budget deal that will force $1.2 trillion in across-the-board cuts to federal spending, unless Congress comes up with the same amount of money some other way. Half is supposed to come from the military, half from domestic programs, beginning January 2.

It is true: cutting everything indiscriminately is no way to run a government. But this alarm-raising campaign, buttressed by defense industry spending to buy and promote “independent”studies, and mount lobbying campaigns, is focused not on federal spending in general, but on military cuts in particular. And the centerpiece of their pitch against these cuts is not the standard line that we need to spend ever more on the Pentagon because it needs every penny to keep us safe. Instead the focus is: jobs.

We're in the process of ending two wars. Since 9-11, spending on the Pentagon has nearly doubled. Clearly we're due for a military budget downsizing.

And the urgent need for job creation is on everyone's mind.

That's why the military contractors and their congressional allies are departing from the usual script to argue for more military spending. 

From the crowd that wants to shrink government because this will create jobs, we are now hearing that we can't shrink the Pentagon because that would cost jobs.

Here are main points of their case, rebutted one by one.

Myth # 1: The military cuts will cost a million (or, according to the Pentagon, a million and a half) jobs.

You don't need to get into the details of the many reasons to question these figures to recognize the big flaw: Cutting military spending will only cost jobs if nothing else is done with the money. As economists from the University of Massachusetts have shown, (findings recently corroborated by economists at the University of Vienna [i]) military spending is an exceptionally poor job creator.  Taking those cuts and investing them in other things—clean energy, education, health care, transportation—will all result in a net gain in jobs. Even cutting taxes creates more employment than spending on the military.[ii]

Myth # 2:  More Pentagon spending will create more jobs.

A researcher at the Project on Government Oversight recently exposed the shaky foundation of this argument. He found that since 2006 the largest military contractor, Lockheed Martin, has increased its revenues from military contracts, even as it was cutting jobs.[iii]

Myth # 3: Defense sequestration will gut our military industrial base.

Hardly. The Pentagon cuts contained in the budget deal will bring the military budget, adjusted for inflation, to where it was in 2006. Close to its highest level since World War II. More than the next 17 countries (most of them our allies) put together.[iv] 

These cuts are easily doable, with no sacrifice in security, because they are being made to a budget that has nearly doubled since 2001.

Myth # 4:  The public is buying the myth.

President Obama is actually running an ad criticizing his opponent for advocating military spending increases. The clear pattern in recent polling shows that this is a smart move. Majorities agree military spending is too high.[v]

Myth # 5:  The military economy is part of the bedrock of our jobs base.

A researcher at the Project on Defense Alternatives looked at this one. He cited a Congressional Research Service study of aerospace employment. More than 500,000 Americans are employed in aerospace manufacturing. About two-thirds of this is commercial, however. Though the defense industry has worked hard to spread itself around for maximum political effect, more than half (61%) of the nation’s aerospace industry jobs are concentrated in six states.[vi]

By contrast, more than 8 million Americans are employed in education, law enforcement, fire fighting, and other emergency and protective services -- working in every community in America.

The effects on the jobs base from cuts on the domestic side of the budget, in other words, will be much larger and more widespread than the effects of military cuts.

Myth # 6:  The military economy is part of the bedrock of our overall economic health.

Alan Greenspan, among many others, has contrasted spending on infrastructure, education, and health care with military spending. The former, he noted, strengthens the productivity—the performance—of the economy as a whole; the latter does not.

Military spending is like a family's insurance policies, he said. The family should spend enough to insure against disaster, but not a penny more, because that family should put as much as possible toward increasing its well-being through education and other enhancements to its quality of life. 

Myth # 7:  Military workers have already taken their share of the hits.

No. The global outplacement firm Challenger, Gray and Christmas tracks layoffs month by month. For the past three years, while military spending has absorbed more than half of the discretionary budget (the part Congress votes on every year), the private sector contractors it supports have absorbed an average of only 4% of the nation’s job loss. See this spreadsheet (docx).

During those three years, the defense industry laid off a total of 106,000 workers. During the same period, state and local governments laid off more than 500,000 workers.

Myth # 8:   The political campaign against sequestration is consistent with the dominant economic philosophy of the politicians doing the campaigning.

No again. The free marketeers who think shrinking government will create jobs are preaching that the Pentagon budget can’t be shrunk because this will cost jobs.

Congressman Barney Frank has summed up nicely what they are asking us to believe: “that the government does not create jobs when it funds the building of bridges or important research or retrains workers, but when it builds airplanes that are never going to be used in combat, that is of course economic salvation.”

Myth # 9:  The contractors have their workers' interests at heart.

If they did, they might narrow the gap a bit between the CEO’s and the average worker’s salary.  For Lockheed Martin (CEO: $25 million[vii]; average worker: $58,000[viii]) this gap is more than 400 to 1.

Myth # 10:  Sequestration will force contractors to warn most of their workers of an impending layoff. 

Lockheed is threatening to send these notices a few days before the November election.  The argument for this bit of political blackmail is that since the cuts aren’t specified, all workers are at risk.  While Lockheed claims these notices are required by law, the Labor Department, i.e. the controlling legal authority, says they are not.

In fact, as researchers from Win Without War and the Center for International Policy recently pointed out,[ix] the defense and aerospace industry is sitting on a pile of cash from yet another year of record revenue and profits in 2011.[x] Lockheed alone has $81 billion in backlogged orders, and more coming in.[xi] They have it a lot better than most companies.

And this cushion gives them time to plan for the downsizing, and keep the workers they profess to care about employed, by developing new work in other areas. See Fact Sheet: Replacing Defense Industry Jobs for some ideas on how.

Footnotes

[i] https://www.dropbox.com/s/6s4ix8muj2kmhhx/a%20non%20linear%20defense%20growth%20nexus.pdf

[ii] http://www.peri.umass.edu/236/hash/0b0ce6af7ff999b11745825d80aca0b8/publication/489/

[iii] http://pogoblog.typepad.com/pogo/2012/08/defense-contractor-time-machine-less-spending-more-jobs-analysis-reveals.html#more.

[iv] http://www.usnews.com/debate-club/should-congress-repeal-the-scheduled-cuts-to-defense-spending/7-reasons-to-keep-the-defense-budget-sequestration-cuts

[v] http://www.slate.com/articles/news_and_politics/frame_game/2012/08/obama_s_ad_against_military_spending_have_polls_shifted_on_the_defense_budget_.html?utm_medium=referral&utm_source=pulsenews

[vi] “US Aerospace Manufacturing: Industry Overview and Prospects,” Congressional Research Service, December 3, 2009. http://www.fas.org/sgp/crs/misc/R40967.pdf.

[vii] http://www.businessinsider.com/the-highest-paid-ceos-at-the-largest-us-based-financial-companies-2012-6#2-george-roberts-kkr-49

[viii] http://www.peri.umass.edu/236/hash/0b0ce6af7ff999b11745825d80aca0b8/publication/489/

[ix] http://www.huffingtonpost.com/william-hartung/lockheed-martin_b_1625183.html

[x] http://www.pwc.com/en_US/us/industrial-products/assets/pwc-aerospace-defense-review-and-forecast.pdf

[xi] http://online.wsj.com/article/BT-CO-20120620-709424.html

The recession has been hard on everyone. Tens of millions of people lost their jobs. Many of those who didn't lose their jobs suffered salary cuts. Retirement savings and home values have plummeted.

Even people who have kept their jobs and homes have had to worry about the possibility of losing them.

But the recession is officially over. In fact, it has officially been over since June 2009, according to the National Bureau of Economic Research. Last month, we entered the fourth year of recovery.

The reality, though, is that in America there are two of everything. There are white and black schools. There are white and black stores. There are even white and black rappers.

And of course there have been two recessions: a White Recession and a Black Recession.

The White Recession was sharp and painful, but soon over. White America is slowly returning to normal. It's a shade poorer normal to be sure, but normal all the same.

For white men, October 2009 brought the highest unemployment rate of the past sixty years. White male unemployment maxed out at 9.7 percent. It's now stable at 6.9 percent.

This rate is still too high, but it's not catastrophic - unless you're one of the 6.9 percent.

The white female unemployment rate is now even lower: just 6.8 percent. Throughout the recession, it never rose above 7.3 percent.

The White Economy is weak, but it's been weak for a long time. It's been dragged down by long-term wage stagnation, cuts in government professional employment and declining union membership.

The Black Economy, on the other hand, is still in full-blown recession.

The Black Recession has now dragged on for four years, if not forty. Black male unemployment is 14.8 percent, and the current trend is up.

The unemployment rate for black men maxed out at 18.0 percent in August 2011, but even that wasn't a record. In the early 1980s recession, the black male unemployment rate went over 20 percent.

The black male unemployment rate has now been over 10 percent for 49 consecutive months. But that's normal. It's been over 10 percent in more than half of all months on record since measurement began in 1972.

That 10 percent figure is for men who are in the labor market and actively seeking work. It doesn't include, for example, the 5 percent of black men who are currently in jail.

Black women also face serious challenges in the job market. The black female unemployment rate is 11.5 percent, down from a recession high of 13.9 percent in December 2011.

The unemployment rate for black women has now been over 10 percent for 42 consecutive months. Like the black male unemployment rate, it's been over 10.5 percent for over half of all months on record since 1972.

The Black Recession is the proverbial elephant in the room. No one talks about it, but it's there. It's been there for four years, or forty years, if it's been there a day.

In America's cultural and racial climate, it's understandable that President Obama prefers to avoid the subject of the Black Recession. But as he is fond of pointing out, he is the president of all Americans, and that includes black Americans.

Mr. President, the elephant in the room is not a Republican. It's long past time to put an end to the Black Recession. Above all, that means jobs. If the private sector won't provide them, the government should. That means you.

We can't have a jobs program that's just for blacks. But we can have a jobs programs that provides work with dignity to all Americans and that includes black Americans. Roosevelt did it. Johnson did it. Obama can do it.

Mr. President, put America back to work.

DC youth between the ages of 16 to 19 are in crisis. They are experiencing unemployment levels 2.3 times the national average, reports the Justice Policy Institute in their latest research brief Working for a Better Future.

The brief takes a look at the collateral effects on youth who do not have access to jobs, such as higher rates of juvenile justice involvement, negative self-image and disconnection from their community. It also provides compelling evidence for the District to invest substantially more into dynamic long-term job training and placement assistance programs that incorporate job skills development, mentoring, job placement, and innovative program completion incentives like a GED and adjudication expungement. There is a generation of young people who are growing up without the skills and experiences to prepare them to contribute in meaningful ways to their lives, families and communities once they reach adulthood.

Often, I find myself in conversations with people about local DC youth and the popular perception is that these kids don't want to try and take advantage of what's here.  It's true that, on the surface, the District has a wealth of programs set up to "engage, train, and employ young people. Too often, however, this work is fragmented, uncoordinated, and focuses on the quantity of youth served over the quality of intervention." And once through these programs, young people have little to show for it and run the risk of having more encounters with the justice system, becoming a victim of crime, and limited and low-paid work opportunities. The District has a responsibility to make sure its youth in the juvenile are equipped to succeed by offering quality programming that promotes public safety and opportunities for self-development.  

The following are examples of successful programs operating in DC offering comprehensive programming that results in positive changes in the lives of DC youth:

• Youth Build U.S.A - serves low-income young people ages 16-24.
• YearUp - focuses on IT skills training and has a mission focused on helping young people overcome barriers to success due to criminal convictions.
• STRIVE - seeks to "transform the lives of at-risk populations by providing support and training that lead to livable wage employment and societal reintegration."
• JobCorps - a residential education and training program for youth ages 16-24

The report offers the following policy recommendations:

1. Invest more in quality employment programs for youth that includes efforts to link youth with work that interests them, has potential for advancement and development, and connects them to their community.
2. Dedicate more resources in the wards with the most need to access the job market.
3. Use evidence-based models that have been shown to positively impact youth.
4. Ensure that employer partners accept youth who have successfully completed job preparedness programs regardless of justice system contact.
5. Consider innovative incentives for increasing youth participation in programs.

The 2011 Executive Excess report continues to make waves among members of the media and decision-makers in Congress. This time, Senator Durbin, a progressive democrat from Illinois, took to the Senate floor to highlight some of the findings of the report. He particularly zeroed in on General Electric, which has highlighted in the report as one of the top ten most creative tax-dodgers. Watch the video here:

Click here to access the report 2011 Executive Excess: The Massive CEO Rewards for Tax Dodging."

Since 2008 the Institute for Policy Studies has been measuring the balance of federal spending on the military and on climate change.  Here are the results for FY 2011:

Spending on climate change has more than doubled, from $7 billion in 2008 to $18 billion for 2011.  Military spending has increased more, though at a slower rate, climbing from $696 billion in 2008 to $739 for 2011.

The result: the gap between spending on the military and on climate has been cut in half.  In 2008 the U.S. spent $94 on the military for every dollar spent on climate.  In 2011 the ratio will be $41 to $1.

This is progress, but the gap is still unacceptably large, for these reasons:

• The hottest decade on record.  The rate of climate change is accelerating, and legislative action to curb emissions is at a standstill.  $18 billion in federal spending will make barely a dent in a huge problem.
• Security.  The U.S. military has begun to talk about “climate security,” realizing that land and resource conflicts caused by climate change will create security problems unlike any it has ever faced.
• Economic competitiveness.  China is on track to lead the world in the growth industries of solar and wind power by next year.  It spends twice as much on clean energy technology as does the U.S., and about one-sixth as much on its military, or between $2 and $3 on the military for each dollar on climate.
• Jobs. A 2009 study conducted at the University of Massachusetts found that each $1 billion invested in clean energy technology will generate approximately 17,100 well-paying jobs, as compared to 11,600 jobs generated by the same amount invested in military technology.

The full report is at: 
http://www.ips-dc.org/reports/military_vs_climate_security_the_2011_budgets_compared