Project on Defense Alternatives




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The Pentagon Budget and Jobs

How does defense spending rate for job creation?


Compiled and Edited by Ethan Rosenkranz

20 November 2011 (update 25 June 2012)


On October 25, 2011, the Aerospace Industries Association (AIA) published an economic impact analysis which concluded that defense cuts of $1 trillion over ten years would cost the United States more than one million jobs, increase the rate of unemployment by 0.6 percent, and reduce projected growth of Gross Domestic Product (GDP) by 25 percent. 


  • For a copy of the AIA economic impact analysis, click here.
  • For a copy of the AIA press release announcing the economic impact analysis, click here.


The Aerospace Industry report and another study produced under the auspices of the Defense Department have become central to the Pentagon’s defense of its budget, with Defense Secretary Panetta claiming that a 15% cut from current levels of spending could cost America 1.5 million jobs.


Pro-defense spending advocates have used a number of arguments to ward of defense cuts in excess of $450 billion over ten years, first claiming that excessive defense cuts would “hollow-out” the armed services, and next, warning that decreased funding for the Pentagon could accelerate the military rise of China.  While these two arguments failed to gain much traction with the general public, AIA’s frantic claims about potential job losses have been widely disseminated by media outlets and have caused concern across the political spectrum.   But do the claims hold water?



Defense spending is the worst of available choices for job preservation


Economists, journalists, and academics have highlighted major flaws in AIA’s economic analysis and its underlying assumptions, pointing out that (1) defense spending creates fewer jobs per billion dollars spent than other forms of government spending and less than some types of tax cuts as well, (2) the AIA study assumes that 45% of the $1 trillion in defense savings would come from weapons systems instead of other DoD programs, and (3) the AIA study inaccurately claims that the full impact of the spending cuts will be felt in the first year of a ten-year budget window instead of being phased in over time (which would allow job growth in other areas to absorb the impact of Pentagon cuts). 


The following reports, articles, and commentary rebut the claim that defense spending is an effective means of economic stimulus and job creation and challenge the notion that defense cuts totaling $1 trillion over ten years would result in the loss of more than one million jobs. 






With offices in Washington DC and Cambridge MA, the Project on Defense Alternatives develops and promotes defense policy innovation that reconciles the goals of effective defense against aggression, improved international cooperation and stability, and lower levels of military spending and armed force worldwide. Subscribe to the monthly PDA Updates Bulletin.