Research: Publications

Minimum Returns: The Economic Impacts of Pentagon Spending

February 7, 2013 | Report

By William D. Hartung, Natalie Peterson

Download PDF | HTML Version

Over the past two years, Pentagon contractors have financed a series of studies that have made exaggerated claims about the economic impacts of reductions in Pentagon spending.  This report refutes a number of the key findings of those industry-backed reports, which have been extensively promoted in an effort to influence politicians and the media in Washington and around the country.  Specifically, this analysis looks at the impacts of Pentagon contracting for weapons, supplies and services.

Claim #1: Weapons contractors face dire consequences if the Pentagon budget is cut significantly.

Fact: Contractors will be cushioned from the impacts of cuts due to their large backlogs and Pentagon spending already in the pipeline.

  • Major contractors like Lockheed Martin, General Dynamics and Northrop Grumman have backlogs of tens of billions of dollars – the equivalent of two to three years’ revenue.
  • The Pentagon has over $100 billion in unobligated funds that will translate into contract awards over the next few years, providing an additional cushion against budget cuts for Pentagon contractors.
  • Pentagon contract awards have more than doubled since 2001, from $145 billion per year then to over $373 billion per year now.

Claim #2: If the Pentagon budget is significantly reduced, up to 1 million jobs could be lost.

Fact: Independent analyses show that the industry’s jobs claims are grossly distorted. The number of jobs displaced in the event of significant Pentagon spending cuts will be between 290,000 and 500,000, meaning that industry-backed claims are exaggerated by double or triple.

  • Pentagon spending is an especially poor job creator, creating fewer jobs than virtually any other use of the same money, from a tax cut to investments in infrastructure to spending on education.
  • If Pentagon spending is preserved at the expense of tax cuts, infrastructure, education or other public investments it will result in a net loss of jobs nationwide.
  • An analysis based on independent studies from the Cato Institute and the University of Massachusetts demonstrates that the number of jobs displaced in the event of significant Pentagon spending cuts will be just one-third to one-half the levels claimed by industry-backed studies.

Claim #3: Most states face substantial economic impacts from Pentagon spending cuts.

Fact: Pentagon contracts are concentrated in a small number of states.

  • Three states – Virginia ($36.9 billion), California ($36.2 billion), and Texas ($28.4 billion) – account for more than one-third of Pentagon contract awards. And for two of these states – California and Texas – the importance of Pentagon contracting is significantly reduced by the sheer size and diversity of their economies.  The top ten states account for 60% of all Pentagon contracting.
  • Thirty states have Pentagon prime contract awards that are less than 2% of their state GDP – if evenly distributed across states, even a 10% cut in Pentagon spending would have a direct impact of only one-fifth of one percent of the economic activity in these areas.
  • Even in the states that are most dependent on Pentagon contracts, a forward looking economic strategy that marshals local resources now engaged in weapons production to build new industries and expand existing ones can replace or exceed the numbers of jobs displaced by cuts in Pentagon spending.

Download PDF | HTML Version

CIP in the Press
  • Trump ready to approve weapons packages to Saudi Arabia, Bahrain that Obama blocked

    William D. Hartung quoted, 02-08-17

    The Trump administration is poised to move quickly to approve major weapons packages for Saudi Arabia and Bahrain that President Obama blocked during his final months in office over human rights concerns in both nations, U.S. officials and congressional sources say...Read More »

  • Ex-Diplomat: Congress to Scrutinize Tillerson Efforts to 'Make Deal' With Russia

    Harry Blaney quoted

    Sputnik International, 02-02-17

    On Wednesday, the US Senate in a final vote confirmed Tillerson, the former CEO of Exxon Mobil, as President Donald Trump's secretary of state by a 56 to 43 vote, with Republicans backing the nominee and most Democrats opposing him...Read More »

  • Memorandum

    Bill Goodfellow


    John Niles, the Center for International Policy’s board chair, has announced that I will be stepping down as executive director. After 42 years, I need a change and I believe CIP will benefit from a leader with new ideas and new energy. With Donald Trump in the White House, we face enormous challenges and we will have to dramatically ramp up our activities to respond to what I believe is the greatest threat to world peace since the end of World War II...Read More »