The Defense Economy

Report Outline
Budget Under Fire
The Corporate Stake
Procurement Reforms
Special Focus

Budget Under Fire

Contractor Scandals Undermine Support

As members of Congress look for spending programs to cut or eliminate, their attention is being drawn to the Defense Department, which has been spared the budget ax as no other federal agency since Ronald Reagan became president in 1981. Congress quickly embraced Reagan's call to build up the country's defenses and until now has voted most of the military funds he has requested, resulting in military appropriations exceeding $1 trillion. Since 1980, defense outlays have nearly doubled, enlarging the yearly federal budget deficits despite repeated cuts in domestic spending programs.

But this year defense spending has come increasingly under scrutiny and attack. Congressional investigators have turned up “horror stories” of grossly inflated prices charged by defense contractors—of $430 hammers, $1,500 pliers and $640 toilet seats. Several contractors have been accused of cheating the taxpayer, and the Pentagon of catering to corporate greed. The scandals may have shaken public confidence in the defense buildup as well, Louis Harris reported that only 9 percent of the people his pollsters surveyed in January said they favored increased defense spending. In 1980, the figure was 80 percent.

Amid the accusations many remedies are being proposed. Some are simply for reform of the government procurement process to get the most for each defense dollar. Others look at the relationship of defense spending to the overall economy, asking whether a concentration of federal funds in the defense industry is beneficial to the nation's economic well-being.