Is the Next Defense Budget a Stimulus Package?
This essay originally appeared on TomDispatch
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 ten 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 ten divvied up $121 billion in contracts in 2007, an 80 percent 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 percent. 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.
If such war spending had been an effective stimulus for the economy, we would be roaring along on twelve cylinders today. But increasingly this kind of spending mainly stimulates corporate shareholders, stock prices and (of course) war itself.
No matter, the staggering new defense budget ensures that, for the defense industry, some version of good times will continue to roll, even if the economic impact of these huge military investments proves negligible and the need in other areas is staggering.
The 2010 Defense Budget
President Obama is reportedly intent on digging deep into the Pentagon budget. He has given his Office of Management and Budget until April to complete an "exhaustive line-by-line" review of the detailed budget request before it is released. In speeches, he has focused on wasteful and unnecessary defense spending.
Just days ago, Obama insisted that "the days of giving defense contractors a blank check are over." To underline that assertion, he cited a 2008 Government Accountability Office study that found 95 military projects over budget by a total of $295 billion. He pledged to end such egregious practices, and the no-bid contracts that often go with them. That applause line plays well at a time when belts are tightening uncomfortably and boot straps remain elusive, but it misses a reality, no less potentially important in the Obama era than in the preceding one: for (at least) the last eight years, defense contractors haven't needed a "blank check" because they already have the combination to the safe, the PIN number to the account and a controlling interest on the board of the bank.
Given the promised size of the next Pentagon budget, no matter what weapons programs are cut or companies and contracts disciplined, the "bank board" will remain the same because the overall amount available to it shows no signs of changing. In fact, basic funding levels (not including money still being set aside for the wars in Afghanistan and Iraq) are remarkably in line with the most recent Bush administration budget, right down to prospective further increases. The just-released overall figure for the 2010 Pentagon budget is actually $533.7 billion; that is, $20.4 billion higher than Bush's last base budget.
President Obama does not like the term "Global War on Terror" (GWOT), dispensing with the Bush administration's moniker of choice to describe the most costly array of military operations since World War II. But Obama's Pentagon will continue to spend a GWOT-sized chunk of our national treasure, even as troops trickle home from Iraq and the surge relocates to Afghanistan's inhospitable steppes. The preliminary figure for war-fighting in 2010 is $130 billion, which represents a modest decrease from the $144 billion that is expected to go to military operations in 2009. Add that to the base Pentagon budget and you get a subtotal of $664 billion for 2010 military expenditures.
If the estimated costs of military spending lodged in other parts of the federal budget (like funding for nuclear weapons, which is considered the bailiwick of the Department of Energy), as well as miscellaneous non-Defense Department defense costs--about $23 billion last time around--are also included, then President Obama's first military budget should come in at around $670 billion.
After the preliminary budget figures were released, Secretary of Defense Robert Gates told reporters, "In our country's current economic circumstances, I believe that represents a strong commitment to our security." Almost $700 billion is a strong commitment alright. Unfortunately, as a stimulus commitment--and a largely unquestioned one at that--it is certain to prove a drag on our economic recovery, despite the claims of the defense industry and their ever-present publicists and lobbyists.