Debate Over Defense Industry Jobs Escalates

12/14/2011
By Sandra I. Erwin

The impact of defense spending on job creation has become a contentious flashpoint in the debate over how to reduce the nation’s debt and still maintain a strong military.
Defense Secretary Leon Panetta and industry leaders have stood behind estimates that cuts to military spending will ratchet up unemployment. An Aerospace Industries Association-funded study concluded that up to a million jobs will be lost if Congress goes ahead with automatic cuts of half-a-billion dollars to the Pentagon’s budget that are scheduled to begin in January 2013.
The notion that defense cuts should be averted for fears of fueling unemployment has been contested by another study conducted by economists at the Political Economy Research Institute of the University of Massachusetts, in Amherst. They surmised that $1 billion spent on the military will generate about 11,200 jobs. By contrast, spending those funds elsewhere in the economy would create 16,800 jobs for clean energy, 17,200 jobs for healthcare and 26,700 jobs for education.
Now comes Marion C. Blakey, president and CEO of the Aerospace Industries Association, offering another rebuttal to the PERI UMass study.
Blakey dismissed the professors’ job math as academic hogwash.
“It takes an ivory tower to come up with a study like that,” Blakey said Dec. 14 at AIA’s Year-End Review and Forecast Luncheon, in Washington, D.C.
Blakey said it the debate over jobs is about the need to sustain critical defense and aerospace skills, not about transferring resources from one sector of the economy to another. The AIA study, conducted by George Mason economist Stephen Fuller, estimated that more than a million jobs would be lost in 2013 alone if the Pentagon’s budget is cut by $100 billion, $45 billion of which would be taken from weapon-procurement accounts. Of those million jobs, 352,000 would be high-wage skilled positions, and the rest would come from other sectors that would be affected by shutdowns of weapon manufacturer plants.
The PERI Umass study, meanwhile, contends that if the goal is to create or save jobs, defense spending is not the most efficient way to do it.
Blakey said the PERI findings are “completely hypothetical.” She specifically challenged the economists’ assertion that government spending could create green-energy jobs. “Where do they think they’re going to create green jobs when solar panels are made in China?” Blakey asked. “Theoretical is always interesting if you’ve got the time for it.”
Robert Pollin, one of the authors of the study, said the university's research is credible, as it was based on U.S. government data.
“Of course it’s an academic study,” he said in an interview. “If you want to say that anything done by professors is automatically stupid because it’s done by professors, then we are guilty as charged.”
Pollin's team used data from the U.S. Commerce Department, he said. Based on surveys of U.S. businesses, Commerce can calculate how many jobs result from a given amount spent on any activity in the economy. “It’s a very useful, neutral technical tool for evaluating the relative employment index of one type of spending versus another,” Pollin said.
The green-jobs estimate does not include manufacturing of equipment, he said. “Seventy percent of what we call green investments are not manufacturing but energy efficiency, such as retrofitting buildings, upgrading the electrical grid system and the transportation system.” A green-building jobs initiative announced last week by the White House to upgrade government facilities was based on the UMass study, said Pollin.
“One can argue the merits of defense spending on whether we need it to defend the United States,” he said. “It doesn’t matter if it creates a single job because we have to defend the United States. But if the industry says we must spend this money because it’s good for jobs, that’s not an accurate statement. It’s not as good relative to other ways to spend money in the economy.”
Other analysts have argued that, rather than play the jobs card, a more prudent way to make defense budget decisions is to allocate investments based on what skills and technologies the nation needs for the future.
"The Pentagon must develop a long-term strategy that identifies what capabilities are critical to a healthy and adaptable defense industrial base," contend Todd Harrison and Barry Watts, senior fellows at the Center for Strategic and Budgetary Assessments. "The four military services, the office of the secretary of defense, Congress, industry and labor unions all have weapons programs they consider essential and untouchable,” Harrison and Watts assert in a recent article. “But accommodating every sacred cow is impossible in a constrained budget environment."

Topics: Defense Department, DOD Budget

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