This idea [of a "defense stimulus"] is just starting to gain steam, but as yet there’s been no real argument made against such a program. Defense spending, as Donnelly explains, "not only make economic good sense, but would help close the large and long-standing gap between U.S. strategy and military resources…[and] would also satisfy the stimulus principles advanced by President-elect Obama: Military service and employment in the defense industry are jobs ‘that pay well and can’t be outsourced.’"
… everyone knows money at the Pentagon moves more like molasses than a surging river. Severe increases in the cost and schedule of major weapons systems has been amply documented by DOD itself. Embedding expensive weapons in the DOD budget by overestimaing [sic] budgets and lowballing costs and production schedules has resulted in less military for more money, a problem detailed in the new Center for Defense Information book America’s Defense Meltdown. And more troops means billions of dollars in support costs for decades to come.
Feldstein says such wasteful spending can be avoided by doing things "that must eventually be done anyway," such as replacing the equipment lost in Iraq and Afghanistan. Yet he later plugs new Air Force fighter planes and the Army’s modernization program—the very systems legislators and budget watchdogs have targeted for cuts because of their runaway cost and dubious relevance to today’s security environment. Worse, a recent study by the nonpartisan Center for Strategic and Budgetary Assesssments [sic] found that that the military not only overstates "reset" needs but frequently spends wartime supplemental funds on expensive next-generation weapons rather than replacements.
Feldstein ultimately believes these jobs will be created by ramping up manufacturing of, for example, shipbuilding materials. He must have missed the GAO report released just 12 days before his commentary that revealed the Navy averages nearly $8 billion in excess inventory per year. Feldstein admits that building up such inventory "would be wasteful under normal conditions," but "makes economic sense when there is temporary excess capacity." Unfortunately, the conditions that make DOD accounting wasteful in the best of times—such as the inability to track money—don’t fade away when times are tough. And no matter how tough the times, increasing military production for a couple of years to produce more stuff we may not even need does not constitute a sustainable jobs program.
Similarly, here’s Stan Collender on the same topic:
… dollar for dollar, military spending doesn’t provide as much an economic return as domestic spending. Building an extra tank or missle [sic] that then sits idle because it’s not needed provides a one-time boost to the economy. But building a road, bridge, tunnel, sewer, or information superhighway that is needed continues to provide benefits as people, goods, and information travel faster, less expensively, and far more productively than would have otherwise been the case.
As I’ve said before, I understand fully well that the rules of the games when it comes to “stimulus” packages – or any other sort of government spending, for that matter – tend to have much less to do with economics than the attempt to get handouts for whatever one’s pet projects may happen to be, but still: increased defense spending is (1) not an effective way to pump money into the economy, (2) not an investment that fuels genuine economic growth (as opposed to increased government spending) in the long term, and (3) not necessary. Aside from all that, though, Goldfarb is right: there’s absolutely no serious argument to be made against it.
Elsewhere: Your “defense” dollars at work!