From: hack@arabia.uucp (Edmund Hack)
Subject: Re: Alleged Benefits of Military $
Organization: Lockheed ESC, Houston
Date: Wed, 7 Oct 1992 15:29:17 GMT

In article <1469100020@igc.apc.org> mwgoodman@igc.apc.org (Mark Goodman) writes:
[munch]
>
>  But let me explain why
>I think the numbers are implausible.  Military spending goes primarily
>to high income people in capital intensive industries.  

Somewhat true. However, most defense workers are not high income except
by absurd standards. {What is the standard for "high income"? To Bill
Clinton, it is household income of about $55,000. To the IRS, while
perfoming "top heavy" benefits tests, it is salary of about $40k/yr. To
most people it is anyone making more than them ;-). }  Given that median
salaries for _engineers_ in defence are in the low 40s and that
technicians and assembly line staff is lower, I don't think the industry
is mostly high income.  Middle class income, yes.

>It is known to
>produce far fewer jobs (about a factor of 3, if I recall) than the same
>amount of money spend on public works or education.  I haven't looked
>at this in a while, so I don't have references, but the Council on
>Economic Priorities will.

This may be due to the way that the accounting is done and salaries
involved. The overhead multiplier for DOD type work is on the order of 3
to 5, from what I have been told.  That is, the DOD pays an hourly rate
3 to 5 times the worker's rate for his labor. This covers benefits
(insurance, Social Security, retirement) , rent, office supplies,
non-direct departments in the company (i.e. human resources, EEO
Compliance Officers, company managers, accountants, etc.), recruiting
costs and a % for internal R&D.  This varies according to the contract
type. An order for bullets is different from a fighter prototype. Note
also that the single defense worker also "pays" for a part of other
workers. A job as a clerk in a Wal-Mart or a local small business will
have a lower multiplier - the benefits are not as good, the overhead in
consumer businesses is lower (not as much paperwork), salaries are
lower.  The jobs that defense creates are mostly middle class jobs with
good benefits (and middlin' job security) as opposed to most small
business jobs that are entry level and poor in benefits.

>
>I believe it is also true that higher income people spend less of their
>money than low income people, so their money is likely to go into the
>economy fewer times.  

The more you make, the more likely you are to invest and save. This is
(in the long term) good for the economy by making capital available for
job creation. However, most people don't save much.  My wife and I are
unusual in that we are putting about 15% of our gross incomes into
savings (401(k), SEP, ESOP, etc.).  We hope to be semi-retired by age
55. Most middle class persons have 2 major "savings" plans - a house
payment and Social Security. Their milage will vary - Social Security is
a very bad deal for the middle class, house values have had one big run
up recently, but future growth is unpredictable.

>I have heard this as an explanation for the fact
>that the increase in income during the Reagan years did not produce
>sustained increases in consumer demand; the increases went to people
>who spend less of their money.  Not being an economist, I cannot vouch
>for the validity of this argument, but it tends to contradict what Gary
>said.
>
Much of what has been said about the "Reagan years" is very heavily
tinted by politics and agendas.  I recently heard that the reason the
middle class shrunk in the 80s is that the "lost" members moved up, not
down. Is this true? I don't know. The man who said this had an axe to
grind. If consumer spending didn't go up, why is the retail business
expanding, mostly in new methods like "mega-stores"?

>It is important to note that military spending is essentially wasteful
>in the narrow sense that it produces no product or public resource with
>economic value.  Building a highway contributes to the economy by
>facilitating transportation.  Building a fighter aircraft does not.

I have no arguement here, aside from the commerce stimulating effects of
peace and stability.

>Technological spinoffs have become increasingly rare as military
>technology has become increasingly specialized and isolated from civilian
>technologies.
>
Please justify this.  I see a lot of spinoffs all around me, especially
in the computer industry.  The latest Aviation Week has a story on how
TI is turning NASP spinoffs into products that could bring in $200
million/yr by 2000. Not bad.

>In the broader sense, of course, military spending can be extremely
>valuable if it contributes to national security.  I think the debate
>over military spending should rest on our security needs, not on
>disputed economic claims.

True, but unlikely to be implemented soon in Congress. Despite the lack
of need for most military bases in the US, it is almost impossible to
close them now. (The first wave was only closed due to extreme pressure
and arm-twisting, despite the obvious lack of utility they had to
national security.)

[munch]
>
>I don't understand why you think having a connection with Congress should
>associate me with any particular political agenda.  Congressional staff
>members are not expected to pursue their own agendas, but those of their
>bosses.  

<HA! HA! ROFL>
The staffers of the various subcommittees have agendas of their own and
pursue them with vigor. Ask around. Read the book "Hill Rat" that a
former staffer wrote. It is in hardback right now.

>Members of Congress have almost as wide a variety of agendas as
>those expressed on the internet.  In any case, their agendas are a reflection
>of their constituents and (unfortunately) their campaign contributors and
          ^^^^^^^^^^^^ only if the district is unusual
>lobbyists, among whom military contractors are an especially influential
>group.
>
>I hope to help Congress develop better public policies by providing sound
>technical guidance where I can.  

Good luck. Technical guidance is heeded as much in Congress as the 55 MPH 
speed limit is on the Interstates.

>I may offer nontechnical judgments as well,
>but I will do my best to distinguish clearly between technical analysis and
>personal opinion.

Good.  I wish you luck.  

-- 
    Edmund Hack - Lockheed Engineering & Sciences Co. - Houston, TX
  hack@aio.jsc.nasa.gov - I speak only for myself, unless blah, blah..
   Papoon for President - You Know He's Not Insane! - Endorsed by the
  American Friends of the Martian Space Party, League of Winged Voters