Will Military Cuts Hurt Innovation?
By 2020, the Pentagon could lose nearly $1 trillion. This has the potential to affect more businesses than those devoted to government contracting.
What do AOL, Silicon Valley, and the Internet have in common? They all owe their existence to the Pentagon.
The federal government’s military funding has produced innovations that affect everyday consumers—as well as ordinary businesses and entrepreneurs. Just try to imagine your company without the Web. (You wouldn’t be reading this story, for starters.)
So now to try to picture what might happen to innovation—and to a sea of government contractors—if the U.S. goes through with a series of military budget cuts over the next decade. The Pentagon stands to lose roughly nearly $1 trillion by 2020, according to The New York Times, due both to President Obama’s planned deficit reduction and the bipartisan supercommittee’s failure to reach a decision in November.
“If catalyzing innovation is going to be an important part of our economic strategy, then we better be careful how we handle” the military budget, Daniel Sarewitz, director of the Consortium for Science, Policy and Outcomes at Arizona State University, told the Times. “I’d like to see a lot less weapons and a lot less focus on them, but it’s not all about that.
Entrepreneurs with government contracts could end up left in the lurch. Some 12 percent of the Pentagon’s budget goes to research and development, which the military uses to supply contracts. When faced with funding cuts in the past, the Pentagon has followed with “reductions in research spending, too,” the Times reports. Also consider that the military’s R&D funding accounts for 55 percent of all government dollars toward research and development.
There are plenty of small businesses oriented around this government funding: In the latest Inc. 500 list, government services was the second fastest-growing sector, increasing 141 percent from 2007 to 2010. The sector contributed more companies to the top 20 Inc. 500 companies than any other.
Some question whether we should immediately start to panic about this. The Washington Post‘s Ezra Klein suggests we should look at it like this: Is continuing to maintain the military’s budget the best way for the federal government to fund innovation? It’s not, Klein writes, concluding that there are more economically efficient ways to power innovation that will produce consumer products.
But funding the military is politically efficient. It’s much easier to cut non-defense discretionary spending—where the government may direct cash toward more broad-based innovation—than to cut defense spending.
Perhaps the government cuts wouldn’t the worst thing in the world, even if they do come to pass, writes Slate’s Matthew Yglesias. Perhaps the minds diverted toward government contractors will instead use their intelligence in the private sphere, inventing new consumer goods.
Then again, Yglesias writes, “maybe if spending on military robotics declines, reducing the total returns to robotics-related innovation, then we’ll have many fewer people going into robotics and way less innovation. Maybe they’ll teach yoga instead.”
