By Amity Shlaes
No doubt, President Barack Obama will call for stimulus when he talks about job creation in his speech Thursday. Since many of us by now recoil at the word, perhaps it helps to ask, once again: Which Obama stimulus would be the least bad?
The answer, as it happens, is neatly framed in a recent photo of young women posing as Rosie the Riveter, the symbolic female factory worker from World War II. They were snapped on the occasion of Obama's Labor Day visit to the Detroit area (unemployment 15 percent). Defense spending is the key: More hiring and spending by the Army, Navy, Air Force and affiliated departments, such as the Defense Advanced Research Projects Agency, the high-end military technology developer known as DARPA.
This week, and not just because we are marking the anniversary of the Sept. 11 attacks, the case for defense spending as job creator takes the "least bad" prize.
Cover your ears to shut out the libertarian howls and look at the case as simple arithmetic: The most recent jobs report from the Bureau of Labor Statistics showed 14 million Americans unemployed. Slide half a million from the unemployed column to the Pentagon, and you pull unemployment down substantially.
The jobs created by a Defense Department employment program would be superior to any others Obama could advocate, for several reasons.
1.) The military knows how to manage youth. Our great national problem isn't merely unemployment; it's youth unemployment. More than 25 percent of teenagers have no job. The television images of rioting in London held American attention partly because youth joblessness clearly played a role. No U.S. company (though McDonald's Corp. comes close) has more experience handling youth than the military. The armed forces also have expertise in training the disadvantaged and unskilled.
2.) The military knows how to train college-age and mid-career men and women. The Reserve Officers' Training Corps is already on campuses. For older workers, the military knows how to impart useful skills, from systems technology to intelligence analysis to language instruction from Arabic to Spanish.
3.) The military moves fast when it comes to hiring or procurement. If a stimulus doesn't take effect quickly, it isn't really a stimulus, which is what Obama discovered after many millions of his 2009 spending package went unspent. Army and Navy recruiting offices are already rented, and as most Americans understand all too well, the military knows how to spend money quickly. This ability has won the support of economists such as Martin Feldstein, who has previously made the case for the military as a stimulus device.
4.) The military isn't that expensive. You wouldn't know it from reading authors such as Joseph E. Stiglitz, but today defense spending isn't big relative to past outlays. Such expenditure measures 5 percent of gross domestic product. In 2000, when we believed we had a "peace dividend" after the Cold War ended, that level was 3 percent. In 1986, it was 6.2 percent. In 1953, toward the end of the Korean conflict -- which President Harry S. Truman called a "police action" -- that share was almost 12 percent. As World War II ended, the spending was about 36 percent.
Sure. But hasn't military spending already ballooned relative to other government outlays? Even that point isn't strong. In 1954, total federal spending was almost 19 percent of GDP and defense expenditure was more than 10 percent. The current estimates for total federal spending clock in at about 25 percent of GDP. At 5 percent of GDP, military spending -- even with two wars and other expensive commitments abroad, from Pakistan to Yemen to Libya -- makes up only a fifth of all federal outlays.
And those who argue that defense spending is prohibitive tend to overlook what we'll call the "DARPA factor." The agency has come up with paradigm changers. The most appreciated of these, at least currently, is the Global Positioning System, which DARPA helped perfect. In the 1980s, after the downing of a Korean civilian airliner by the Soviet Union, President Ronald Reagan promoted the forerunner to GPS as a future tool for civilian navigation. Not many newspapers paid attention at the time. But companies such as Garmin Ltd. certainly did.
To all these reasons one can add a final and more controversial one. A more heavily militarized U.S. represents a deterrent to future wars. Though the peace dividend enabled us to reduce budget deficits in the 1990s, the cutbacks also sent a message to al-Qaeda and other terrorist groups: "The U.S. isn't ready to fight." Now, especially as European nations scale back their armed forces, an expanding U.S. military would send a very different message.
On a heavy anniversary week like this one, we think about numbers, but we also think about our national soul. That soul is tired of two things: war and joblessness. It's worth thinking about how an expanded military could help prevent both.
(Amity Shlaes, a senior fellow in economic history at the Council on Foreign Relations, is a Bloomberg View columnist. The opinions expressed are her own.)
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-0- Sep/06/2011 17:53 GMT