Defense Budget Is Mismanaged

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The following originally appeared on U.S. News.

Should we cut cancer research to pay for more bombers? This is the agenda of many Republicans as we start to get closer to the date where the sequestration rules from a 2011 budget agreement will actually bite. The deal was structured so that the immediate budget cuts were limited. The big hit was scheduled to take place in January 2013. At that point, spending on both the military and discretionary portion of the federal budget were scheduled to fall by roughly 10 percent.

There are good economic reasons for questioning the wisdom of cutting the federal budget while the economy is still saddled with high rates of unemployment and large amounts of excess capacity. While it would be great if the private sector would fill the gap, hiring the government workers who lose their jobs, there is no reason to think this would be the case.

Businesses hire people when they see more demand for their products, not because the government is laying off workers. It is more likely that these cutbacks will slow the rate of private sector hiring by pulling money out of the economy. The government workers who lose their jobs will not be spending as much money at restaurants, malls, and other places where their spending creates jobs. In a weak economy, this is likely to mean less hiring in the private sector.

Apart from the size of overall spending, there is also the division of the spending. Many Republicans are now upset about the deal they agreed to back in 2011 that provided for roughly equal cuts for the defense and nondefense portions of the budget. They would rather see more money come out of areas like government support for college and preschool education, the national parks, and even cancer research rather than allow the cuts to the military budget to go through as specified.

[Check out our collection of political cartoons on defense spending.]

While the proponents of cuts to cancer research are trying to scare people into believing that the sequestration of the military budget will leave the country defenseless, this is not based on an analysis of the numbers. Even if the cuts go into effect, after adjusting for inflation, military spending will still be more than 20 percent higher in 2013 than it was back in 2000. This should leave us plenty secure assuming the budget is properly managed.

Of course the Defense Department has a long history of getting ripped off by private contractors who charge high prices for complex weapon systems of questionable value. When funding for these weapon systems is threatened with cuts, the contractors run to their friends in Congress for protection.

This is likely what we are seeing now. The issue is not defending the country, it is about defending defense contractors’ profits.

Dean Baker is co-director of the Center for Economic and Policy Research and has worked for the World Bank, the Joint Economic Committee of the U.S. Congress, and the OECD’s Trade Union Advisory Council. His latest book is The End of Loser Liberalism: Making Markets Progressive.

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