And I mentioned in my first post that *some *infrastructure may be a better bet. But this does not mean that military spending is bad, from a Keynesian perspective. Infrastructure spending also has natural limits. It has a very good return on investment if the current spending is below maintenance levels. It has a somewhat poorer return on investment if you are building “bridges to nowhere”. Therefore, there is likely a point where you are better off putting money into the military than more infrastructure.
Well, since nobody else called bullshit on this, I will.
Speaking as someone who knows what he’s talking about, I can tell you that a vast majority of the money goes to people; and even the machinery spending is people (you think the Boeing fighters and Litton carriers are created entirely by robot, a la skynet or something?)
Anyway, review this and feel free to get smarter about it.
The procurement budget, from which the toys you are talking about come from, isn’t even totally hardware (lots of services, acquisition people, etc), is $140b out of $685.
Most of O&M is people (range workers/contractors, Sgt Suckalooski turning wrenches, etc). MILPERS is all people (salaries, bennies) and that alone is bigger than the procurement budget.
I’m sure this is in conflict with your extremely warped worldview, but then again, you probably know that already.
Wars destroy wealth, and divert resources from creating wealth. That is not a good form of any kind of stimulus.
You are actually arguing against Keynesianism in general, which IMHO is the broken window fallacy writ large, but this has nothing to do with my question. Keynesians believe that when unemployment is high, the government should spend money to employ people. The military employs a lot of people. Therefore, I don’t understand why some Keynesians believe military spending is a net negative.
The rebuttal was to the claim that it’s “one of the best forms” of Keynesian stimulus. It ain’t close to that, even in the strictly economic terms you requested replies be limited to.
The point is that Keynesianism is completely orthogonal to alleged destruction of wealth. Which of these would a Keynesian prefer to give $2000 to?:
- A man intending to buy an HDTV built in China (real value gained, but no effect on US employment)
- A man intending to build a fence for $1500 (using American labor and materials), and then spending another $500 to destroy that fence (no value gained, but a fairly direct increase in employment)
Besides, most of the money spent on the military is not destroyed; it is consumed by those it employs–just like any other form of stimulus.
Finally, to defend the “one of the best” statement–if military spending is indeed behind infrastructure spending in Keynesian effectiveness (something I’ll agree with, to a point), that still makes it potentially #2, which would certainly still qualify as “one of the best”.
I’m not sure that’s true.
For one thing, paying soldiers costs a shitload of money. Just eyeballing it I’d guess pay alone, between active and reserve personnel, plus civilian workers in DOD, costs at least $150 billion a year, and I think my guess is low.
And of course if you want to buy expensive equipment, much of what you’re paying for is the labour needed to make it.
It is true, however, that military labour is an economic dead end.
Most of the right-wing commentary has insisted that there would be no recovery and also that inflation and rising interest rates were imminent. Why warn about inflation conditional on a recovery if you are so certain there won’t be a recovery at all?
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Anyway, since there’s been no recovery, you wouldn’t expect inflation. Nonetheless, inflation in the U.S. is creeping up, even while the economy appears to be sliding back into a double-dip recession. Last June, core inflation was 1.05%. This June, it was 3.56%. BLS Data Here. .
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You are wrong about this. Here is the pdfof the report. The 3.56 isn’t core inflation but unadjusted 12 month increase in CPI. The core inflation is 1.5%. If you look at the table in that graph there has been a massive 20% increase in energy prices which has obviously pushed the non-core number up.
Here is a typical right-wing pieceby Kudlow warning about stagflation. He is certainly not saying inflation is conditional on a strong recovery, quite the opposite.
Here is another interesting pieceby the libertarian Tim Lee, who has changed his mind about inflation and wonders why most libertarians are such fierce inflation hawks.
That makes no sense at all. At the point at which building infrastructure is no longer a good investment it is still better than military spending; essentially, military spending is all “bridges to nowhere”. There is nothing more useless than building bombs and missiles and exploding them overseas. We’d be better off blowing up stuff in the US, at least then we’d have the benefit of rebuilding. Troops stationed overseas spend a portion of their wages there, and there are huge expenditures on local labor and materials.
Military expenditures are not all simply thrown away. People are trained. Durable goods are built. Buildings are improved. Some of it in fact goes right back into infrastructure–the Army Corps of Engineers, say.
Yes, people stationed in overseas bases in developed countries are likely to spend much of their earnings abroad–although a great deal probably goes back to families in the US. It seems likely that an even higher percentage of the money of troops in Iraq/Afghanistan goes back to the US.
In any case, I think this is some extent besides the point. Even if military spending were entirely “bridges to nowhere”, it would still be a valid recipient of Keynesian stimulus, since the idea of Keynesian spending is to spur employment. In this sense, it is much better than tax cuts, or payments to states, or “cash for clunkers”, or any number of other stimulus systems where you can’t guarantee that the money won’t simply go to paying down existing debts, or go to buying non-American products, or something else that doesn’t have a direct benefit to US employment.
Military spending doesn’t have this problem–the first layer of spending goes almost entirely to Americans or American companies, and subsequent layers (either because of purchasing rules or the demographics of military personnel) are likely to also have a large percentage go to Americans.
It was shameful that the NYT printed this unsupported attack and even worse that they allowed Krugman to respond only with a letter to the editor which they published after 11 (count them 11) laudatory letters about Okrent and a single one also pointing out that the bastard had no proof.
And magically, I’m never in those threads where you provide the cites, or if I am, the cites you provide turn out to be hollow.
I don’t believe you. And it doesn’t matter if I did. for purposes of THIS discussion, you have no cites. Full stop.
You need to show that these are the same people. You can’t conflate people who argued there would be inflation with people who argued there would be no recovery (or a weak one).
This is not a guy predicting that there would be stagflation at a time when Krugman was boldly taking the opposite position. This is a guy claiming that stagflation is already happening now (& hence likely to continue).
More importantly, everyone agrees that stagflation is theoretically possible, since it actually happened in the late 70s. And - AFAIK - everyone (or virtually everyone) agrees that all else being equal low or negative economic growth will tend to reduce inflation (& interest rates). What some people say is that there are other factors that impact inflation which may tend to push it higher even in the face of low economic growth, and this is where the debate over the stimulus is focused. But that’s not to say - as you imply - that a guy who predicted low growth in the US & UK, and low interest rates and inflation, has made 4 independent predictions, such that if he’s right about all 4 it tends to validate his economic views. These 4 things are at worst highly correlated, and they pretty much amount to one prediction, which again, is one that was made by many different people from many different vantage points.
No one is arguing that defense spending is not a Keynesian stimulus, it’s a question of how good it is vs other spending. Hereis a list of possible uses for stimulus money. It disagrees with your intuition about things like general aid to the states. Increased spending on defense is not in there, but I expect that buying military equipment is not well suited for stimulus because you can’t just build things like new high-tech airplanes overnight.
I’ll respectfully disagree with that last part. If the governement announces that they are going to but a new fleet of high-tech airplanes, they won’t be built overnight but from a stimulus perspective, “overnight” is bad. You need some assurance that the purchases will be long term to have a stimulus effect. Otherwise the vendor will just pay overtime and bonuses but not hire new people. If a company is getting to deliver a fleet over the next five years, they’ll expand their work force, their suppliers will expand their workforce, the community around the factory can expand with at least some confidence that it isn’t going to go away overnight.
So what? Kudlow is completely wrong that the US is actually experiencing stagflation today. No sane economist of any political persuasion would agree with that. In any event he has been warning about stagflation and inflation for a long time; for example this blog postin 2009
No these predictions don’t amount to the same thing. It is entirely possible to have slower growth and higher inflation because of a negative supply shock. It possible to have lower inflation and higher growth because of faster productivity growth. It is possible to have sharply rising interest rates and low inflation and growth; take a look at Italy and Spain.
Also right wing commentators and politicians like Kudlow and Ron Paul have repeatedly warned about higher inflation while also claiming that Obama’s policies will also slow down growth. Please read the Miller article again; he is asking why libertarians keep warning about inflation when it has remained so low over the last few years. He is himself a libertarian and presumably knows what libertarians have been saying about inflation.
But is he a true libertarian? Does he put government subsidized sugar on his porridge?
That should be Timothy Lee, not Miller. Here is the articleagain.
He’s looking at one isolated data point and claiming it may be the first wave. It may be. Time will tell.
Again, just because things are possible to exist independently doesn’t mean that they’re not correlated.
It’s like the weatherman predicting that tomorrow will be more humid, overcast, and rainy. You can get each of these things indpendently of the other, but it’s not like he can claim to be right about three things if he’s right about all of them. Generally, there’s a strong correlation and relationship.
Actually, on further reflection ISTM that the warnings about inflation are all or mostly related to Fed monetary policy, and the warnings about economic slowdowns related to Obama tax-and-spend fiscal policies.
OK, I agree that libertarians don’t like inflation. What about it?
[FWIW, my guess is that the reason libertarians/conservatives dislike inflation these days - assuming it’s true that they dislike it now more than at other times - is because they see the government as risking or causing inflation in order to be able to spur economic growth despite what they see as Obama’s anti-growth policies. IOW, they feel if the proper fiscal policies were in place, the same growth ends could be achieved without inflationary monetary policy, so they resent the inflation risk being created. But that’s neither here nor there, in terms of this thread, and is just speculation anyway.]