Reasonably soon, many of our troops will be returning from Iraq. The Afghanistan mission, stable for now with around 100,000 troops, will start to become, if not militarily, at least financially manageable. Soon our defense-oriented economy will begin to wind down. The U.S. Defense Department budget for 2010 stands at $650 billion. The figure represents 4.7 percent of gross domestic product. If history is any guide, post-war reductions in defense spending may wash across the national economy like a cold shower, dampening any fervent hopes of recovery. Reverting to a (somewhat) normal rate of 3.5 percent of GDP, which is what defense spending was in 2003, reduces 1.2 percent of spending. Mark Twain said there are lies, damned lies and statistics. Even so, if standard calculations mean anything, that reduction could result in an additional loss of 100,000 jobs or more, just because of reduced defense spending. With the discharge of personnel from the military services into an already overburdened workforce, we could face even higher unemployment figures.
This nation has been involved in a hot, shooting war somewhere on the planet for 23 of the past 70 years, along with the odd, weeklong dustup here and there. Don’t forget we were heavily engaged in the Cold War for more than that. Indeed, one reason the Soviet Union no longer exists is that we spent the Soviets under the table. From 1941 to the present, we’ve become accustomed to an economy dependent to some extent on defense expenditures. Let’s be honest, $650 billion is a chunk of change; I don’t care who your daddy is.
Former President Dwight D. Eisenhower warned many years ago of the burgeoning military-industrial complex — a juggernaut that, if not reined in, could become a shadow economy. And Eisenhower was a former five-star general, so he had a bit of authority on the subject.
Here are some quotations I found interesting. “First, of course, is the recession, with its high level of joblessness, in an economy that has lost its competitive edge and whose manufacturing base has been eroding.” And another: “In addition, consumers have a lot of debt, and are worried about the future. Since the mid-70s, consumers have been saving less. Growth and family income slowed markedly. … Consumers can’t go on a buying spree to restart the economy.”
Sound familiar? They’re not recent quotes. They’re taken from a symposium that took place in March 1992 on whether or not America can afford peace. One of the main issues up for discussion then was how to effectively downscale the economy to reduce military expenditures driving our financial train, and not cause added economic misery. It wasn’t easy then; it won’t be this time.
The question is, can we really bring the troops home by Christmas and expect our financial house to thrive? Guns? Butter? Which will it be?