Backwards Logic

Cutting back on defense because of a weakness in the economy makes no sense. In fact, “that logic is exactly backwards,” Harvard professor and economist Martin Feldstein told the House Democratic Steering and Policy Committee yesterday. Actually, Feldstein told the committee (full testimony) that an increase in defense outlays as part of an economic stimulus package—such as the one that the incoming Obama Administration is preparing as its No. 1 priority—would have substantial benefits for the economy. He said a 10 percent increase in defense outlays for procurement and for research would contribute about $20 billion a year to the overall stimulus budget. And, a five percent rise in spending on operations and maintenance would add an additional $10 billion. Yet these efforts—which, in the grand scheme of things, are comparatively small, when discussing a projected stimulus bill of hundreds of billions of dollars—would yield about 300,000 jobs, said Feldstein, who is also president emeritus of the National Bureau of Economic Research and was chairman of the Council of Economic Advisers to Ronald Reagan. (For more, read Feldstein’s Dec. 24 op-ed piece in the Wall Street Journal.