Safer is richer

Safer Is Richer

THE LEFT takes it as a given that the U.S. economy is terribly burdened by the military enterprise f defending it, as if it were fine to build houses but wasteful to erect fences around them. As we are often informed in other contexts, however, the high costs of a government program may be outweighed by even higher benefits. The basic benefit of defense to the economy lies not in creating jobs (building new pyramids would do that) nor even in spinning off hightech novelties, but simply in safeguarding the economy itself and the people who participate in it.

Now Wayne State economist David Fand has assembled evidence to back the common-sense notion that an economy is more vibrant when it is more secure. It seems the trend line of the dollar's strength since 1970 almost precisely tracks the course of real defense spending: plunging under President Carter, recovering under President Reagan, then falling back last year when Reagan agreed to a defense freeze and again when Gramm-Rudman seemed to doom the defense buildup. In fact, defense outlays were a much better predictor of the dollar's strength than trends in the deficit or interest rates. Oil prices also moved in reverse sympathy with defense, rising while we were dismantling our military capabilities and then falling when we began to reverse the process.

"This is why strong defense spending is usually a good investment, because the dollar costs in outlays are compensated by the falling real costs of imports, especially oil,' Fand explains. "Investors and speculators tend to move to currencies of countries they believe are safe and strong--and away from currencies of countries they think are vulnerable and weak.' If the Congressional Budget Office models took into account the economic benefits as well as costs of defense, who knows how the debate in Congress might change?

COPYRIGHT 1986 National Review, Inc.
COPYRIGHT 2008 Gale, Cengage Learning