Military Stimulus Complex

U.S. Military Spending as Economic Subsidy

“F-35’s New $412 Billion Cost Estimate Is a Modest Increase By Its Standards” reads a headline from Bloomberg. “Navy Requires $450 Million More to Complete Zumwalt-Class Due to Shipyard Performance” reads another from USNI News. The U.S. military is no stranger to a billion dollar increase in cost for its “next generation” weapons programmes, and the mind numbing figures are a great source of consternation for those who argue it could be better spent on social programs. However U.S. military spending only makes sense if you do think of it as its own social program.

The product of the U.S. defence budget is not weapons alone, but lucrative financial opportunities with well paying technical jobs and board positions for retired generals to name a few. The U.S. Department of Defence is the largest employer in the world with 3.2 million employees on its payroll. That’s not factoring in all of the large defence contractors such as Lockheed Martin who do the bulk of weapons manufacturing—which alone employs 114,000 people. The defence budget is a permanent economic stimulus policy that is shielded from the criticism jobs programs usually receive. It is the perfect way to get nominally conservative individuals to buy into unlimited stimulus spending.

This is why white elephant projects like the Zumwalt or F35 never lead to a change in policy; they have functioned as intended in creating jobs, supporting sub contractors, and justifying even further spending masquerading as development. Spending the money is the point, not spending it effectively. Even now the much maligned Zumwalt class is receiving a $10.5 million hypersonic “modernization” program —despite it being the only ship in its class and hopelessly over budget.

With this military spending as stimulus model, waste is actively incentivised as waste isn't really wasted if its still pumping money into the U.S. economy. This leads to the seemingly perverse projects that spend billions for seemingly no return ala DARPA—or a 35 trillion dollar hole in the Pentagon.

Missiles don't actually cost $2million each, in the same way toilet rolls in hospitals don't actually cost $250 each. This makes the eye watering US military aid bill to Ukraine make more sense too. The numbers are made up to justify the stimulus spending and funnelling large amounts of grey cash through Ukraine. To them, that isn't a $10 billion destroyer you're looking at there: that's $10 billion worth of cash in the hands of paying consumers. The contractors, subcontractors, and all those employed in related economic activity can now spend. You're looking at a monument to employing 1000 people to do 50 people's work.

The benefits of being a loyal employee of the military stimulus complex does not end there, as a receiver of freshly printed dollars through your subsidised wages you get to reap the rewards of the Cantillion effect. Being able to spend new money on goods at today’s prices, is a whole lot better than spending it on increased prices tomorrow raised by the bidding up of producers now aware of new money being spent. As a recipient of new money your wages can be spent before they have had any inflationary effect.

This is of course, unworkable, like all nationalised industry is unworkable and leads to malivestment, warped incentive structures and a negative feedback loop. With the sheer scale of what is ostensibly a socialist spending project, I’m surprised this framing is not more common. All of this is no way to run an actual military. American hegemony has lasted for so long that its military has lost touch with the reality that it could have to fight a war under material constraint. If that were to happen the current model would be disastrous.