[Peace-discuss] Romney-Ryan "Ploughshares to Swords" Budget Would Cost America At Least 530, 000 Jobs

[Robert Naiman]

http://www.huffingtonpost.com/robert-naiman/romneyryan-ploughshares-t_b_1825072.html


Romney-Ryan "Ploughshares to Swords" Budget Would Cost America At Least
530,000 Jobs

Mitt Romney and Paul Ryan want to cut domestic spending in order to
increase military spending. Regardless of whatever else may be true -- that
is, regardless of whether you think more military spending is otherwise a
good idea, or how you feel about the public services that would be axed by
greater domestic cuts -- their plans to cut domestic spending in order to
increase military spending would cost hundreds of thousands of American
jobs.

How many jobs? A plausible estimate is that their plans to cut domestic
spending in order to increase military spending would cost at least 530,000
jobs.

What does 530,000 jobs mean in the context of the U.S. economy?
According to<http://www.dlt.ri.gov/lmi/laus/us/usadj.htm> the
Bureau of Labor Statistics, there are currently about 12.8 million
unemployed out of a labor force of about 155 million, for a measured
unemployment rate of 8.3 percent. If an additional 500,000 people were
employed today, there would be 12.3 million unemployed and the unemployment
rate would be 8 percent.

By comparison, in September 2011, economist Mark Zandi of Moody's Analytics
estimated <http://www.economy.com/dismal/article_free.asp?cid=224641> that
if two stimulus measures were allowed to expire at the end of 2011 -- the 2
percent employee payroll tax holiday and the emergency unemployment
insurance program -- that would cost 750,000 jobs in 2012. As you may
recall, there was a huge fight about whether those two stimulus measures
should be allowed to expire. The job loss from replacing military cuts with
domestic cuts is roughly of the same order of magnitude. If it was worth
fighting about saving those 750,000 jobs by extending the stimulus, then
it's worth fighting about saving 530,000 jobs by not replacing military
cuts with domestic cuts.

But there's a crucial difference between the two measures: saving those
750,000 jobs by extending the stimulus cost the government real money, $160
billion. Whereas, saving 530,000 jobs by not replacing military cuts with
domestic cuts is *absolutely free*. It doesn't cost the government a single
dollar.

Replacing military cuts with domestic cuts costs jobs because domestic
spending is more efficient than military spending at creating jobs. Because
this is true, military spending can't create jobs if the money is taken
from domestic spending to pay for it. If the money is taken from domestic
spending to pay for it, then military spending actually has the net effect
of destroying jobs -- the diversion of resources destroys more jobs than
the military spending creates.

How many jobs? The Economic Policy Institute has
estimated<http://www.epi.org/blog/paul-ryan-budget-discretionary-cuts-cost-jobs/>
that
the Ryan budget, by making $404 billion in domestic cuts by 2014, would
destroy 4.1 million
jobs<http://www.epi.org/blog/paul-ryan-budget-discretionary-cuts-cost-jobs/>
through
2014.

Under the sequester established by the Budget Control Act, cuts are
supposed to be split 50/50 between the military budget and the domestic
budget. But in the Ryan budget, no cuts come from the military
budget<http://nationalpriorities.org/blog/2012/08/13/ryan-pick-solidifies-competing-visions-federal-budget-debate/>,
all cuts come from the domestic budget.

Suppose we are allowed to alter the Ryan budget in just one way: by
restoring the principle that for every dollar of domestic cuts, there
should be at least one dollar of military cuts. How would that change the
job loss from the Ryan budget?

The answer is that it would reduce the job loss from the Ryan budget by at
least 12.9 percent. Instead of losing 4.1 million jobs due to the Ryan
budget, we'd lose only 3.57 million jobs, thereby saving 530,000 jobs.

The 12.9 percent figure derives from a December 2011
paper<http://www.peri.umass.edu/fileadmin/pdf/published_study/PERI_military_spending_2011.pdf>
by
Robert Pollin and Heidi Garrett-Peltier of the Political Economy Research
Institute at the University of Massachusetts-Amherst, which used standard
means of estimating the impacts of spending on the U.S. economy. Pollin and
Garrett-Peltier found that spending an additional billion dollars on the
military creates 11,200 jobs. Every method they looked at for spending an
additional billion dollars in the domestic economy created more jobs. The
least job-creation-efficient of these -- tax cuts to promote personal
consumption -- would create 15,100 jobs. If tax cuts to promote personal
consumption are the least efficient form of domestic spending from the
point of view of job creation, then it follows that every time you move a
billion dollars from domestic spending to the military budget, you destroy
at least 3,900 jobs. Conversely, every time you block a move to transfer a
billion dollars from the domestic spending to the military budget, you save
at least 3,900 jobs. Given a certain amount of job loss from domestic cuts,
you reduce the job loss by at least 3,900/15,100 = 25.8 percent by
replacing all the domestic cuts with military cuts. If you only replace
half the domestic cuts with military cuts, then you reduce the job loss by
12.9 percent. Thus, restoring to the Ryan budget the principle of at least
one dollar in military cuts for every dollar in domestic cuts would reduce
the job loss of the Ryan budget by at least 12.9 percent.

I checked this calculation with Robert Pollin and Heidi Garrett-Peltier and
they agree: 12.9 percent is a lower bound for how much you reduce job loss
when you replace half the domestic cuts in the Ryan budget with military
cuts.

Indeed, Heidi Garrett-Peltier wrote back with another path to the same
result:

$404 billion in cuts yields 4.1 million jobs lost, according to EPI

$404 billion in cuts yields 4.52 million jobs lost using PERI's military
multiplier of 11,200 jobs/$1B

$404 billion in cuts yields 6.10 million jobs lost using PERI's tax cuts
for consumption multiplier of 15,100 jobs/$1B (the proxy for "domestic"
cuts)

If, instead of the Ryan cuts (all domestic), we used a 50/50 split as
Robert [Naiman] suggests, the multiplier would be 13,150 jobs/$1B (average
of two categories above)

Then $404 billion yields 5.31 million jobs lost

This is 12.9 percent lower job loss than using the "domestic" multiplier,
so it would be accurate to say that restoring the cuts to 50/50
military/domestic would reduce job losses by 12.9 percent as compared to
all domestic.

Of course, this is arguably a lower bound, since all of our other domestic
multipliers (health, clean energy, infrastructure, education) are higher.
So the reduction in job losses would likely be greater than this 12.9
percent.

Again, it should be noted that while 530,000 jobs is 12.9 percent of the
overall job loss figure estimated by EPI, there is a crucial distinction.
Avoiding the 4.1 million in lost jobs estimated by EPI due to the Ryan plan
simply by not doing it and continuing the status quo would cost the
government $404 billion. Avoiding 530,000, or 12.9 percent of the Ryan job
loss, by keeping the principle of at least one dollar in military cuts for
every dollar of domestic cuts *would cost the government nothing*.

This is especially important to keep in mind because the EPI estimate is
measured against a baseline that no-one in Washington is advocating as
policy: the budget projections of the CBO. It's a standard baseline for
analysis, and the CBO is mandated by law to assume as a baseline that
mandatory spending will continue according to current law and that
discretionary spending -- both domestic and military -- will grow by 2
percent a year, to take account of inflation. But no-one in Washington is
proposing as their 10 year plan that discretionary spending grow by 2
percent a year, and Ryan's proposed cuts to Medicare spending are copied
from Obama. Everyone is proposing to cut compared to the CBO baseline. That
means, almost surely, that at least some of the job loss attributed by EPI
to Ryan is misleading, in the sense that Obama and everyone else are also
proposing to cut spending from the CBO baseline and therefore are also
proposing to destroy jobs compared to the CBO baseline. Not cutting any
spending compared to the CBO baseline and therefore not destroying any jobs
is not on the menu in the restaurant.

So in practical terms, the question, at least in terms of job destruction,
is not, whose plan for cutting spending will destroy jobs -- every plan for
cutting spending will destroy jobs -- but whose plan for cutting spending
will destroy the most jobs, and whose plan for cutting spending will
destroy the least jobs.

And therefore, while restoring the principle of at least one dollar in
military cuts for every dollar of domestic cuts would remove 12.9 percent
of the EPI-estimated job loss compared to the CBO baseline, it's likely to
be a greater share of the Ryan increase in job loss compared to any
currently-politically-plausible Democratic plan for cuts.

In "The Five Reasons Why the Ryan-Romney Economic Plan Would Be A Disaster
for America," economist and former Secretary of Labor Robert Reich
notes<http://robertreich.org/post/29838761776>
:

FOURTH: He wants to add money to defense while cutting spending on
education, infrastructure, and basic research and development. America
already spends more on defense than the next five biggest military spenders
put together. Our future productivity depends on the public investments
Ryan wants to cut.

But unfortunately, Reich doesn't give us any numbers to give us a sense of
the relative impact of this component of Ryan's plan.

There's been a flurry of activity around the job losses of the Ryan plan,
but until now few have said boo about the job losses of the Ryan plan
attributable to replacing military cuts with domestic cuts, and until now
no-one -- as far as I am aware -- has tried to put a number to it. Let this
be the first salvo. Progressive and liberal economists should get on the
case. Explain to America how replacing military cuts with domestic cuts is
going to cost America jobs, and put a number to it, so Americans can get a
sense of the scale of the impact.

-- 
Robert Naiman
Policy Director
Just Foreign Policy
www.justforeignpolicy.org
naiman at justforeignpolicy.org
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.chambana.net/pipermail/peace-discuss/attachments/20120823/3fc6142e/attachment-0001.html>