Of all the industries in line for a handout in this financially frightening time, the defense industry would seem to bring up the rear. After all, most defense companies saw their profits spike as the U.S. defense budget reached historic heights in recent years. Yet the economic crisis has apparently renewed some people's concept of the Defense Department as a giant jobs program. This argument recently found a venerated voice in Martin Feldstein, a former Reagan administration economist now serving on president-elect Barack Obama’s economic team. In a Wall Street Journal editorial published on Christmas Eve, Feldstein argues that plowing an extra $30 billion into DOD would produce 300,000 jobs. With all due respect to Dr. Feldstein, his reasons do not reflect the well-documented realities of the Pentagon budget.  

Feldstein recommends a “short-term surge” of at least $30 billion per year in 2009 and 2010, followed by a sharp dropoff. About $20 billion would go to procurement and research and $10 billion to operations, presumably to support the thousands of troops he also wants to add. But everyone knows money at the Pentagon moves more like molasses than a surging river. Severe increases in the cost and schedule of major weapons systems has been amply documented by DOD itself. Embedding expensive weapons in the DOD budget by overestimaing budgets and lowballing costs and production schedules has resulted in less military for more money, a problem detailed in the new Center for Defense Information book America's Defense Meltdown. And more troops means billions of dollars in support costs for decades to come. 

Feldstein says such wasteful spending can be avoided by doing things “that must eventually be done anyway,” such as replacing the equipment lost in Iraq and Afghanistan. Yet he later plugs new Air Force fighter planes and the Army’s modernization program—the very systems legislators and budget watchdogs have targeted for cuts because of their runaway cost and dubious relevance to today’s security environment. Worse, a recent study by the nonpartisan Center for Strategic and Budgetary Assesssments found that that the military not only overstates “reset” needs but frequently spends wartime supplemental funds on expensive next-generation weapons rather than replacements.  

Feldstein ultimately believes these jobs will be created by ramping up manufacturing of, for example, shipbuilding materials. He must have missed the GAO report released just 12 days before his commentary that revealed the Navy averages nearly $8 billion in excess inventory per year. Feldstein admits that building up such inventory “would be wasteful under normal conditions,” but “makes economic sense when there is temporary excess capacity.” Unfortunately, the conditions that make DOD accounting wasteful in the best of times—such as the inability to track money—don’t fade away when times are tough. And no matter how tough the times, increasing military production for a couple of years to produce more stuff we may not even need does not constitute a sustainable jobs program. 

The Department of Homeland Security and FBI—which Feldstein also recommends boosting—have their own problems, but they aren’t clogged with the same volume of waste as DOD. The assumption that stimulus money will somehow avoid these blockages and go straight to the production line is wishful thinking. More importantly, it’s unfair to ask taxpayers to reward unaccountability and mismanagement while tightening their belts.