How does defense spending cause job loss? I thought it was considered a standard fiscal stimulus.

Do you want terrorists to kill you and your family?....

Sorry. Another reflexive response back to Bushspeak due my utter disappointment in Brand Obama. He is not new and improved as his packaging stated.

Dean -
Thanks for the post and the link to your paper. My question is: Does taxing "undesirable" behavior (e.g. tax on gas guzzlers) have the same effect on the economy as rewarding "desirable" behavior (e.g. paying people to buy fuel-efficient cars)? I realize this isn't the point of your post, but I'm curious.

Dean,

Aren't the findings of medium/long-term negative employment impact from this annual incremental 1% of GDP of Defense spending (due to higher interest rates, stronger dollar, and possibly higher inflation) applicable to ANY increase in annual deficits of 1% of GDP due to ANY form of incremental spending (except those that actually represent investments in future productivity -- e.g., infrastructure or education or R&D, IF spent wisely)?

In other words, aren't you just measuring the impact on employment of ANY annual incremental 1% of deficits due to incremental spending (assuming mostly related to current consumption, not good investments in future productivity)?

It is utterly pointless to take this fossil fuel lobby scare propaganda seriously but if you want to refute them, wouldn't it be better to point to the fact that Japan and Germany still have a strong manufacturing sector despite much higher taxes on energy (which is what global warming legislation would imply for the US)? Whatever the Post's and NYT's economic experts say, you can safely rely on the opposite being true.

Brooks,

if the increase in spending was paid for in higher taxes then we would just see the job loss sooner.

Jim,

yes, rewarding good behavior would also cost jobs because we have to either raise taxes or run deficits to do it -- the mechanism is higher interest rates, a higher dollar, fewer exports.

But with short term rates at zero, does this model still hold up? Or would the additional government spending in this case, now, be a stimulus that would increase rather than reduce jobs?

Dean,

As usually happens when I ask you a question that may interfere with your talking points, you didn't really answer my question. Any chance you will actually answer my actual question? Or are you going to ignore it and perhaps offer more pretense of an answer?

Again, isn't the key force driving the results of that analysis higher interest rates (causing "crowding out" and a stronger dollar) due to larger deficits, and since you consider Defense spending essentially non-investment spending (just essentially spending on current consumption), wouldn't the same analysis say the same thing about medium/long-term negative impact on employment from ANY incremental, deficit-financed spending that is essentially non-investment spending (Defense, non-investment social spending, whatever)? My guess is that the reason you are dodging this question is because you don't want to admit that the answer is "yes", because that would probably mean implicitly admitting that much of the increased social spending that you advocate would have a negative medium/long-term impact on employment. But perhaps you'll surprise me and actually give an actual answer.

I'm tempted to add another question related to what you've said in your non-answer response, but it's hard enough to get you to actually answer one question rather than answer some more convenient question that you pretend had been asked, so I don't want to give you a chance to just answer a new question from me while continuing to ignore my initial question.

congratulations on fannie mae's adoption of "right-to-rent" dean!

Charles,

these are stories that are supposed to apply during normal times. when you have 10 percent unemployment, spending on defense, shuffling paper, or anything else is a job creator.

Brook:

i don't think you've read the report. it seems kinda common knowledge that there is a real difference between military spending and other kinds of investment. there is no productive return from a military investment if its to buy tanks or planes. improving infrastructure or upgrading communications infrastructure has real economic returns and makes the economy more efficient. military spending, unless it improves the fundamental structure of the economy somehow, might as well be money down the drain

Brooks,

As I said, we modeled the increase in military spending that we saw, which was not accompanied by a tax increase. If we had included a tax increase then the drop in GDP would have been quicker, but the net effect on GDP and jobs would have been roughly the same.

Dean,

Are you kidding me? Is it possible that you really don't understand what I've asked you -- twice?? Can I possibly make my question any clearer??

I'm not asking you about deficit-financed vs. tax-financed; I'm asking you about deficit-financed Defense spending vs. any other deficit-financed spending of the same magnitude (and which you also consider essentially non-investment spending). Wouldn't the same model say essentially the same thing about impact on employment in either of the latter two cases -- i.e., whether the deficit-financed incremental spending were on Defense or on any other deficit-financed incremental spending that is assumed to be similarly of a non-investment nature?

If somehow you've been genuinely confused until now, but the above has finally gotten through to you, please re-read my question, and if you wish to engage in good faith and give an actual answer to my actual question, please do.

Or if this is yet another case of what you usually do, and you're just pretending to misunderstand my question, you could just continue pretending to be confusing my question with some other question you'd rather answer.

But if you continue to do so it will be even more obvious that you are disingenuously dodging the question rather than engaging in good faith.

Andrew,

I did (quickly) read the report (scanning some of it).

The argument you are making is irrelevant to my question to Dean. I very explicitly excluded from comparison spending that the model would consider as much more of an investment in nature ("those that actually represent investments in future productivity -- e.g., infrastructure or education or R&D, IF spent wisely").

So I'm asking Dean about apples-to-apples and I exclude the oranges of which you speak.

As for ROI on Defense spending, it is an overstatement to say there is no economic feedback (no ROI at all). Even the report acknowledges technology spin-offs. And although obviously some contend that incremental Defense spending for particular purposes does not provide any economic benefits or increase our physical security or the security/well-being of other peoples (e.g., intervention to stop genocide), if one believes otherwise then the the assumption would be that the associated incremental Defense spending in question serves our economic interests (e.g., safeguarding oil supply and thus causing oil prices to be lower, ceteris paribus) and thus yields some economic ROI, and/or provides increased physical security and/or helps other peoples. Reasonable people can disagree on the above in any given case, but my point is that an often overlooked factor in ROI in Defense spending is the degree to which it serves our economic interests (I'm not saying this degree is necessarily great enough to be a net economic/financial plus, just pointing out that there is often some ROI).

But again, the above is not relevant to my question to Dean.

Just read the paper: it implies the same negative employment impact occurs from any incremental spending:

"The Economic Impact of the Iraq War and Higher Military Spending"

"It would be possible to design an ambitious agenda to curb global warming that relied entirely on paying people to act in ways that would lead to fewer emissions of greenhouse gases. This would affect the economy in a way that is very similar to the way that military spending affects the economy. In the case of military spending, we are paying firms and individuals to produce weapons, ammunition, and supplies for the military. This global warming policy would be paying firms and individuals to produce and install cars, appliances, and other items that would lead to a reduction in greenhouse gas emissions.

In both cases, the initial effect on the economy would likely be job gains, since both policies generate more demand for goods and services. However, in both cases, the policy would likely lead to a rise in interest rates and inflation, as higher levels of demand begin to push against the economy’s capacity. The rise in interest rates will lead to less investment, and less demand for cars and houses."

Whoever "Reply to Brooks" is,

I think Dean is a big boy and he can handle answering a simple, clear, straight-forward question. So I'll await his answer.

As for your comment, it isn't an answer to my question (and of course I read those points in the paper). My question is obviously much broader than just a comparison between Defense spending and spending for environmental purposes (of the sort described or any other).

Let's see if I can get an actual answer from Dean. If history is any guide, he'll either not respond or will continue to respond with some pretense of confusion about what my question was (addressing a more convenient question that I didn't ask), despite the clarity of my question. In this case, it seems that Dean simply does not want to say that much of the (deficit-financed) social spending he advocates would hurt employment in the medium/long-term just as (actually, probably more than) deficit-financed Defense spending. So he is probably just pretending to misunderstand my question, which is as clear as clear can be. Of course, I'd be glad to be surprised if he breaks his habit and actually responds in good faith with an actual answer to my actual question.

The Post loves to rail against the budget deficit.

Sorry Brooks,

i thought you were focused on deficits. yes, any direct expenditure (as opposed to transfer payment like Social Security) that does not count as investment will have roughly the same effect.

Dean,

And how would the negative medium/long-term effect on employment of deficit-financed transfer payments such as Social Security or other income support differ from that effect of deficit-financed Defense spending? Wouldn't such deficit-financed transfer payment spending be, if anything, even less of an investment and more consumption-related, and thus wouldn't the negative medium/long-term effect on employment be either the same or worse than deficit-financed Defense spending of the same magnitude?

What about Medicare and Medicaid, by the way?

Brooks,

no, not all of transfer payments are spent, so the negative impact of SS spending is less than the negative impact of defense spending. With Medicare, it would be close.

Dean,

Come on, now.

(1) Just about any spending will have some investment component, even if small relative to the consumption component, right? For example, you acknowledged in your paper that there is some ROI (some economic feedback) from Defense spending in the form of technology spin-offs. And that's even aside from whatever positive economic impact comes from particular types of Defense spending (insofar as it protects our economic interests such as oil supply). And of course, the income earned by Defense suppliers and personnel is not all spent immediately, either.

(2) Wouldn't you say that the bulk of SS spending goes to current/short-term consumption?

(3) And Medicare you say is close, but why would it be less consumption and more investment than Defense?

(4) Same question with Medicaid (even though I'd assume there is some economic feedback from keeping the working age poor healthier and thus in some cases more productive in the future)

(5) So what's left in the budget that would be much more investment-oriented than Defense (if any more, or even as much)?

The answer to #5 is "Very little as a percentage of total spending", isn't it? Incremental spending on infrastructure. Maybe incremental spending on education. Probably a total of less than 10% of total spending is in spending programs/categories for which a given increment of spending would have much more (if any more or even as much) of an investment (medium/long-term ROI) component as the same amount of Defense spending.

So what do we have here?

A. Deficit-financed incremental spending that is essentially (mostly) non-investment in nature has a negative medium/long-term impact on employment (because it increases interest rates, and thus has the effects of "crowding out" and of a stronger dollar)

B. Almost all federal spending across almost all categories of spending (Defense, Medicare, Medicaid, Social Security, other income support, etc.) represents such essentially non-investment spending.

Therefore,

C. The point isn't that deficit-financed incremental Defense spending in particular reduces employment in the medium/long-term, but rather that incremental deficit-financed spending in general (of most types, whether Defense or social spending) has that adverse effect.

Right?

There is no reason to give any credence whatsoever to economic models, I don't care whoever employs them. These are models that have never been rigorously validated by empirical observation and they have never been shown to generate valid, testable predictions.

I am also mystified why Dean mentions economic models at all in this context. The article referred to does not rely on any economic models, it simply repeats a propagandist talking point of the fossil fuel lobby that could be easily refuted. Turning this into an argument about economic models is rather out of place.

Piglet,

there are economic models that do show job loss from the type of climate legislation being debated. I am not a big fan of these models, but my point is simply their selective use. The Post feels obliged to hype the projected job loss in the context of global warming, but has literally never raised the much larger job loss that would be projected based on recent increases in military spending.

Answer to Brooks
Wrong! A successful pro athlete could spend his money on a house, car, education for his kids etc. or he could spend it on crack, booze and ladies. Both are economic activity but one has a future. For you to win your point you would have to show that disproportionate spending on defense could be sustained by any political economy. Examples from history please.

Dean, the Post does not explicitly refer to economic models at all. True, some academic critics, like William Nordhaus, do base their argument against global warming mitigation on economic models. If I were debating Nordhaus, I might point out the internal inconsistency of his framework (why would you count clean energy infrastructure as a cost rather than an investment?) and the selective use he makes of model predictions. But most important would be to point out that his models have no scientific validity.

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Dean,

So do you agree with my conclusion "C" at the end of my comment above? If not, where in my reasoning do you disagree?

By the way, if you agree with my conclusion "C" that doesn't affect whatever degree of validity there may be to your assertion that WaPo treats differently particular types of spending (more likely to not negative impact on employment from one vs. the other) that actually have roughly similar negative medium/long-term effect on employment. I'm just saying that it seems that you are being selective as well by failing to acknowledge that most deficit-financed incremental spending of most types has this adverse effect, including much spending you advocate, much of which probably has an even greater degree of this adverse effect.

typo. Should have read:

"more likely to note negative impact..."

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