Bob Pollin: Cuts triggered by the Congressional sequestration process are not as big as Pentagon spin and military spending is an inefficient "job creator."
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.
This is the second in our series of interviews with Bob Pollin about what would a new industrial policy look like for the United States, and dealing with the fact that there already is one, except it comes out of the Pentagon—militarism as an industrial policy. Now joining us from Amherst, Massachusetts, to continue our discussion is Bob Pollin. He's codirector of the PERI institute there. Thanks for joining us again, Bob.
ROBERT POLLIN, CODIRECTOR, ECONOMIC POLICY RESEARCH INSTITUTE: Thanks for having me, Paul.
JAY: So let's start off with where we're at with what they were calling sequestration, the deal they made during the deadlock about the debt ceiling. And they came to this automatic switch that if the debt wasn't going to be cut by such and such, there would be these automatic cuts on social spending, but also what they called massive cuts on the military side. Now both from Democratic members and Republican you're hearing lots of talk, well, we're not really going to cut the military so much, 'cause it will be too dangerous and so on. So if there is going to be a new industrial policy, and people say, where are you going to get the money for this, the first stop is military spending is usually the obvious answer. So what do you make of this argument that the cuts that are planned are already, quote-unquote, draconian and will weaken American defense and all that?
POLLIN: Well, under the sequestration agreement that if the Democrats and Republicans cannot come up with a way to cut the budget deficit adequately, in January 2013 we will experience automatic cuts in military spending of $55 billion and the same amount in social spending, now, the fact is that the cuts to the military are—they're being called gigantic and unsustainable, and they're going to destroy our defenses, including by Leon Panetta, the defense secretary. So this is the position of the Obama administration.
JAY: Panetta said, what, there's going to be $1 trillion of cuts and that's too much.
POLLIN: Right. So here's how we get $1 trillion number. What we're really talking about is the following. For the current year, the budget for Afghanistan and Iraq is $88nbsp;billion. Now, the Iraq War supposedly is over. The Afghanistan war is—at least the fighting is supposed to end over the course of this year. Now, what the Pentagon has budgeted, assuming these things actually happen, is that the spending on those two wars will go down from $88 billion, where it is now, to $44 billion. Forty-four billion is still a lot of money, especially given that the wars aren't being fought anymore. But that's their basic contingency fund. So that means we get $44 billion of cuts out of less spending in Iraq/Afghanistan.
Now, then we say, okay, if there is a sequestration implemented, we get another $55 billion out of the sequestration of military spending. So if you add 55 and the 44, you're going to get $100 billion, roughly. And then you carry that over 10 years, $100 billion times 10 will get you to $1 trillion. That's really where it is.
Now, the fact of the matter is, the real cuts are just the fact that these wars are ending. That's the real cut. The sequestration cut is scheduled to happen, but we have already seen the manipulation in Congress such that if they so choose, they could load all of the cuts onto social spending and not touch the military budget at all—that's really where the debate is—and so that, as such, the military budget is going to see, if we take account of the fact that the wars are ending, essentially no cuts. Now, if we were to impose the sequestration cuts on top of the winding down of the two wars, we would move from a military budget where it is today, at 4.7 percent of the economy, 4.7 percent of GDP, down to 3 percent of GDP by 2017. That would be [crosstalk]
JAY: Okay, just to be clear, hang on one sec. So that's—if we go from what essentially now is a $700 billion budget to a $600 billion budget, this is what we're talking about.
POLLIN: That's what we're talking about. And that would just bring us back to where the military budget was as a share of the economy in the year 2000, the last year that Clinton was in office. That is the worst-case scenario from the military standpoint. That's the worst-case scenario.
And, by the way, in case we manage to find new places to fight wars, the sequestration rules are completely out the window. The sky is the limit. The military can spend whatever it wants. That's all built into these agreements.
JAY: So the point here is that the cuts really aren't so serious. And, you know, we've yet to hear anyone really make an argument why year 2000 levels of spending aren't sufficient if there's no wars going on. That's the point [crosstalk]
POLLIN: If there's—yeah, if we're not fighting these wars in Iraq and Afghanistan, I mean, why do we have to sustain a budget of $44 billion there? Forty-four billion dollars is a lot of money. That's three times the deficit that California's facing now today that's going to lead to layoffs of teachers, nurses, firefighters, police. So that's what we're talking about, just with that small amount of money, supposed small amount of money that we're talking about as a residual for Afghanistan and Iraq.
JAY: Now, it doesn't get so directly linked at the national political discourse, the connection between jobs and military spending. But at the state and more local levels, there's an enormous amount of even ad campaigns. For example, if a certain jet aircraft might not be renewed or its contract may not be passed through Congress, magazine articles, newspaper articles generated by the aircraft industry about how important this is for employment—they don't even—sometimes don't even mention security. It's just straightforward link to jobs. But isn't there something to that? You know, even if one doesn't like it, isn't all this military spending critical to so many local economies across the country?
POLLIN: Absolutely. In fact, the Pentagon, part of their industrial policy has been this brilliantly executed plan of having activities in every single congressional district in the country. So every single congressional district in the country benefits from the $700 billion military budget. If we're spending $700 billion, Paul, on the military, we cannot help but create millions of jobs. How could it be otherwise? When you spend that level of money, you're going to create a whole lot of jobs. And I would say roughly 6 million jobs in the economy are tied directly to the Pentagon spending.
That said, if we were to spend instead on, for example, education, if we take the situation in California where Governor Brown is talking about massive budget cuts, which means cuts to education and health care, for every dollar that is spent on the military, if the money is instead spent on education, you get 2.5 times more jobs, you get about 27 jobs per $1 million of spending on education versus 11 in the military. So we can't think about spending on the military strictly in absolute terms of job creation; we have to compare it with job creation in other sectors of the economy; and so that when we talk about holding this $44 billion for Afghanistan and Iraq after the wars are over, instead of thinking about that money going to fill the budget gaps in California, we're also talking about major job losses as a consequence of military in that sense.
The Pentagon is making a very aggressive case—and again, now, these are Democrats, this is the Obama administration. They're claiming that cutting this $1 trillion from the military budget, which is essentially, as we saw, a maximum $100 billion per year relative to the current level, will increase the unemployment rate by 1 percentage point. That is, if the unemployment rate today, which it is, is 8.2 percent, if we go through with these cuts, it's going to be 9.2 percent just because of the military. Well, as far as I know, they've never presented any serious evidence to support that case, though they make it all the time. And the fact of the matter is that shifting money out of the Pentagon and into education, into health care, into the green economy, even into having consumers spend, will create more jobs, between 50 percent and 140 percent more jobs than keeping the money with the military.
JAY: Alright. Well, in the next segment of our interview, we're going to carry on the conversation. What would an alternative industrial policy look like? And this debate in terms of should America's money, the wealth created in America—I mean, does it get invested in speculation? Does it get invested in militarism? Or is there some kind of productive investment that should be carried out? And what role should government play in all of that? So please join us for the next part of our series of interviews with Bob Pollin on The Real News Network.