On December 10 the New York Times ran a lengthy story by Christopher Drew about the Air Force's F-22 fighter, saying that Pentagon plans to terminate production of the plane put President-elect Barack Obama's military and economic goals on a "collision course." The story noted that 25,000 workers are involved in building the fighter, so ending it could cause economic damage at a time when the next administration will be trying to create the same kind of high-paying jobs elsewhere in the economy.
The actual number of potential job losses from killing F-22 is closer to 100,000, when both direct and indirect economic impacts are included. Studies have found that manufacturing jobs generate more indirect economic activity than service jobs. But liberals and conservatives alike will rebel against the idea that weapons systems should be built to bolster the economy. It sounds Orwellian. Liberals don't want an economy driven by war production, and conservatives don't want federal spending to distort market forces. On the other hand, we all want to be defended and it's inevitable that a $500 billion defense budget will have some impact on the economy. So maybe the time has come to think seriously about when weapons spending is good for the economy, and when it isn't.
The Bush Administration has always avoided such questions, fearing they would lead to the kind of "industrial policy" associated with centrally planned economies. As a result, the Pentagon has made some decisions in recent years that were potentially disastrous for the broader economy. For instance, if all of the weapons cuts proposed by defense secretary Donald Rumsfeld had been implemented, every major production line for military aircraft but one would have closed. And as economist Guy DuBois of Raytheon pointed out in a December 8 speech, export restrictions on technologies used in military satellites have caused a steady erosion in the competitiveness of the U.S. space industry. There needs to be a better framework for reconciling economic and security policies.
The logical place to start in crafting a more sensible approach is to agree that the government should not be buying weapons just to stimulate the economy. Weapons programs should always be justified mainly on their operational and fiscal merits, meaning they must satisfy valid military requirements in a cost-effective manner. The F-22 meets that standard, because it will guarantee global air dominance for the next 30 years -- arguably the single most important requirement for winning future wars. There is another fighter in development called the F-35 Joint Strike Fighter that only costs half as much, but that plane lacks the speed, maneuverability and fuel-efficiency to provide as effective a deterrent. The two planes were designed to operate together, however the Air Force says it needs more F-22s to do the job.
Once a system is proven to satisfy valid military requirements in a cost-effective manner, it is reasonable to consider what additional economic benefits its manufacture might generate. For instance, does it preserve vital skills that are fungible across other industrial areas? The answer in F-22's case is yes, because the U.S. still has a big commercial aerospace sector benefiting from the economies of scale created by suppliers and labor forces serving both public and private markets. Does it contribute to the nation's trade balance? The answer is yes again -- Australia, Israel and Japan have all indicated a desire to buy the plane.
So unlike some military systems that impede industrial efficiency or send U.S. dollars abroad, the F-22 fighter has real economic benefits that ought to be weighed in any government funding decision.