National Security

The Economics of Military Spending

Deep cuts in defense spending are also having a negative impact on the economy.

Lewis Morris · Sep. 21, 2016

The drastic shrinking of the U.S. military during Barack Obama’s two terms has clearly left America less respected abroad, and most definitely less safe here at home. But it doesn’t stop there. Deep cuts in defense spending are also having a negative impact on the economy.

Towns and cities across the country that were once reliant on defense contract dollars to fuel their economies are feeling the squeeze as the money dries up and facilities are forced to lay off workers.

Hampton Roads, Virginia, for 75 years a mighty naval facility responsible for the construction of hundreds of vessels large and small, is now all but deserted. America’s incredibly shrinking Navy just doesn’t require shipbuilding facilities like it used to, and with Obama’s Pacific pivot under way, what little action remains is now on the West Coast.

The Hampton Roads region has laid off 4,000 people from manufacturing jobs in the last two years, all of them tied to in one fashion or another to shipbuilding. The area used to rely on defense spending for well over half its revenue. Now that portion is below 40%, and everyone is reeling because of it.

When a town or region finds itself dominated by an industry, like Hampton Roads was dominated by the defense industry, what were once seemingly unrelated businesses all tie together symbiotically. Restaurants feed workers and their families. Appliance and home electronics stores sell their wares to people with more disposable income. Auto dealerships, auto repair, and gas stations all thrive because workers need transportation to travel back and forth to work. When the big industry takes a cut, everybody in the area suffers in some capacity.

In some cases, an industrial base can be repurposed to cater to another product, whether it be automobiles, hi-tech, power equipment, what have you. In the case of Hampton Roads, locals are not confident that their economy will bounce back from the several years of dwindling defense dollars. Even if the next president vigorously reverses the downward spending trend, it could take years — if it ever happens — for the renewed fortunes to have an impact on the region.

It may seem counterintuitive for us small government conservatives, but government spending in certain sectors can actually be good for the economy. (It helps when that government spending is actually mandated by the Constitution.) When it comes to defense spending, high-paying, high-skilled jobs can do wonders for a town or region, raising revenue for local governments and providing a higher quality of life for citizens.

The problem that presents itself now is that the federal government is doing all the wrong things. Obama wants us all to believe that the government can fix everything. Total spending is going through the roof because of entitlements, which means the government is only giving away goodies and not getting anything in return. Obama wants only to expand this redistribution at the expense of the military.

The one area of government spending that can actually create jobs and boost the economy is defense, but that has been cut and slashed in favor of a new worldview that claims America doesn’t need to maintain or steward its status as the world’s most powerful nation. Obama also believes for some reason that by shaving money off defense, he can push more resources toward entitlements. We literally don’t print enough money to make that happen.

To be clear, not every dollar of defense spending is a good dollar spent. There is waste in any bureaucracy. But across-the-board slashing of defense spending not only is a bad idea for our standing in the world, it’s having a negative effect on a fragile economy desperately in need of a boost.

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