In an era of unrestrained federal spending and debt, one of the most ludicrous arguments made by statists is that reducing the military budget would be harmful to the economy. Their suggestion is that military spending is beneficial to the economy — that it creates jobs. Reducing military spending, they say, would result in laying off troops and downsizing of firms that supply uniforms, guns, etc. to the military.
Like I say, that is an absolutely ludicrous argument.
In fact, the Castro regime in Cuba is faced with much the same situation. In that country, the government employs not just the military but also everyone else in society. Not long ago, the government proposed laying off 500,000 government employees. Undoubtedly, Cuban statist economists said the same thing about that proposal that American statists say about reducing U.S. military spending — that it would increase the unemployment rate and hurt the Cuban economy, where everyone is on the verge of starvation.
Let’s assume that we lived in a society in which there was no income tax, one in which people kept everything they earned. Let’s also assume that 99 percent of the populace is employed in the private sector.
That means that most everyone in society is in the productive sector — that is, the sector that is producing goods and services for everyone in society. That’s one of the main reasons that everyone’s standard of living in that society is rising.
One day, the federal government announces that it has selected 25 percent of the population to be in a privileged class of people who no longer have to work. From that point on, the government levies a 25 percent tax on those who are still in the private sector and gives the money to those in the privileged class.
Notice that there is a doubly negative effect in this scenario. One negative effect is that the productive sector has been reduced by 25 percent. With less people producing goods and services, everyone’s standard of living grows more slowly. The other negative effect is that 25 percent of the income of those still in the private sector is taken away from them — income that could have gone into capital (e.g., tools and equipment) that would have made people even more productive.
That’s effectively what the federal government has done with its ever-growing massive military machine that was left in existence after World War II. The federal government drew a large number of people out of the private sector and into the public sector, and it has used the money seized from the people left in the private sector to fund them.
One possible response is that the military machine was necessary to keep us safe. That’s a separate issue and highly disputed by libertarians. But simply because it’s necessary from a military standpoint doesn’t make it beneficial from an economic standpoint. The fact remains that an enormous military machine — just like any other enormous government bureaucracy — is an horrible parasitic drain on the economic well-being of a nation.
Consider how extensive the military-industrial complex has become in American life. One of the most ingenious strategies employed by the complex is spreading its military projects through congressional districts all across America. In that way, communities all across the land can be threatened with a loss of their projects (i.e., jobs) in the face of military cutbacks.
You’ve also got the domestic-base syndrome. Communities that have a nearby military base have conniption fits whenever anyone suggests that the base be closed.
And then there are the countless suppliers to the military of such things as bombs, bullets, planes, drones, tanks, uniforms, coffee, meals, medals, and so forth.
Whenever one proposes cuts in military spending, everyone who has become dependent on the largess goes into action by calling on their congressmen to stop the proposed reductions, at least insofar as they affect their particular area.
Of course, they always couch their argument in terms of the public interest, not their own parasitic dependencies. They cry, “This is no time to make such reductions. We need more federal spending and debt, not less. If we cut back now, it will mean layoffs, both among the troops and the suppliers. That would hurt the economy.”
But let’s work backwards to show how fallacious that argument is.
Suppose that the government lays off the 25 percent that are in the military sector, sending them into the private sector.
The result of that scenario will be doubly positive for two reasons:
One, those people will now be in the private sector — that is, the productive sector. They will now be producing goods and services for everyone in society, thereby contributing to people’s standard of living.
Two, people will no longer have 25 percent of their income taken away from them to fund the military. That 25 percent can be added to the pool of capital, making people more productive, causing standards of living to rise.
Reflect again on the Cuban situation. What would be the ideal solution for Cuba, where the state employs most everyone? It should immediately lay off millions of people in the public sector, sending them into the private sector. Overnight, there would be tremendous economic vitality, as people move toward opening businesses or going to work for new businesses. Over time, the overall standard of living of the Cuban people would soar.
The same principle applies to the public sector here in the United States. The best thing Americans could ever do, from an economic standpoint, is to immediately dismantle the federal government’s welfare-state programs and bureaucracy and its warfare-state, imperialist programs and bureaucracy and eliminate the taxes that fund them. That’s the key to economic well-being and to ever-increasing standards of living.