StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

McKeon's "Unique Defense Industry"

03 Nov 2011
Posted by Gordon Adams

We are in the midst of a full-throated attack by our own Department of Defense and its supporters in the Congress, who are saying anything they can to scare the Congress into sparing defense budgets from further trimming.  it is a scary assault, in part because so many erroneous and irrelevant statements are being made simply to move the banner of fear ahead.

The latest round is the letter in the New York Times today from House Armed Services Committee Chair Buck McKeon, seeing to rebut the October 31 New York Times column Paul Krugman wrote on the impact of defense cuts on employment, similar to comments I made the same day on Capital Gains and Games.

Chairman McKeon clearly does not understand the role of defense in the economy or that part of the economy that meets the needs of the Defense Department.  He says "the defense industry is unique. It relies entirely on federal government dollars.  Unlike other sectors of the economy, there are no private sector resources that can rush in to fill the void left by a reduction in federal spending."

Sadly, there is no such industry.  Maybe in his grandfather's day there was a defense industry that relied solely on the defense dollar, but not today.  There are about five large companies - Lockheed Martin, Northrop Grumman, Raytheon, General Dynamics, and L3 - that rely for most of their business on the Defense Department.  The rest of the big ones have been absorbed into those five.  (Boeing doesn't count - it has a huge commercial jet transport business base.)

But that is not the defense "industry."  Without Chairman McKeon knowing it, the Department of Defense now relies on the commercial economy to a growing extent.  And it is a commercial "technology" base that plays the central role, not the leviathans of the old defense industrial base. 

America's technology base, and the global technology base, are producing directly for DoD and are making the parts, software, wiring, communications, optics, and the rest that the leviathans assemble.  And this base is highly diversified, making and selling to the commercial economy world-wide.

In reality, this technology base is our future.  It is the base that Chairman McKeon argues (in other talks) will thrive when we get our debts and deficits under control.  Its growth will be the engine that creates new employment, for all Americans, including those that will be affected by lower defense spending.

Instead of defending dinosaurs, Chairman McKeon should be championing a meaningful deficit reduction process that puts all elements of the federal budget on the table.  Probabaly too much to ask.



Which harms the US more the

Which harms the US more the Military Industry Congress Complex or the Wall St Fed Treasury axis of evil?

OWS is correct; wall st, the war profiteers and financiers own congress who serve only few at the expense of the 99%.

Read Frederic Bastiat: The Parabel of the Broken Glass.

Military Keynesianism

Tell a deficit hawk that the air force base in his district will be closed for reasons of economy and he will by his gurglings and thrashings show that he believes that the federal government creates jobs, his pietistic letters to the New York Times to the contrary notwithstanding. Furthermore, the federal government creates jobs as the initial investor in enterprises to which private businesspersons gather as hogs do at a trough of fresh corn.

Panetta jumped the shark

Hi, Gordon!

Leon Panetta really sounded absurd on Friday. Hope you can lay out a road map for them to accomplish these cuts.


Andy O

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