The Employment Effects of Downsizing the U.S. Military

This study focuses on the employment effects of military spending versus channeling some significant part of the military budget into alternative purposes. We begin by introducing the basic input-output modeling technique for considering issues such as these in a systematic way. We then present some simple alternative spending scenarios, namely devoting $1 billion to the military versus the same amount of money spent for five alternatives: tax cuts which produce increased levels of personal consumption; health care; education; mass transit; and construction targeted at home weatherization and infrastructure repair. Our first conclusion in assessing such relative employment impacts is straightforward: $1 billion spent on personal consumption, health care, education, mass transit, and construction for home weatherization and infrastructure will all create more jobs within the U.S. economy than would the same $1 billion spent on the military. We then examine the pay level of jobs created through these alternative spending priorities and assess the overall welfare impacts of the alternative employment outcomes. We then consider what would be the impact on employment of transferring all $138 billion in funding that went to the Iraq war in 2007 into alternative peaceful purposes. As we show, a transfer of funds of this magnitude would enable the U.S. government to provide, for example, health insurance for the 45 million U.S. residents who are now uninsured, and still provide funds for significant investments in education and energy conservation. A transfer of the Iraq budget into these alternative purposes would also expand employment in the U.S. by between 600,000 – 1 million jobs, depending on how exactly the $138 billion were allocated.