Cities Shorted on Defense Spending, Study Contends

Challenging conventional wisdom that Pentagon spending benefits big defense centers such as Los Angeles, a Michigan State University professor released a study Thursday that shows three-fourths of U.S. cities pay more in federal taxes for defense than the cities receive in Pentagon spending.

Taxpayers in the Los Angeles area pay about $12.3 billion for defense, but only about $10 billion is returned in Pentagon spending--a deficit of roughly $900 per family, according to the study by James R. Anderson, a professor of economics and business history.

Anderson argues that the “size and uneven distribution” of Pentagon spending “create drastic imbalances in the net federal tax burden imposed on major cities, states and regions. Unequal sacrifice for national security is a fundamental characteristic of the impact of the Pentagon tax.”

But several academic experts dismissed the report as simplistic in its methodology, questioning what conclusions could be drawn from it.

“It is not a very intelligent way of thinking of Pentagon spending,” said Joshua Epstein, a defense analyst at the Brookings Institution. “The way you decide whether defense spending is too high or too low is to examine national security needs. It has nothing to do with local priorities.”

Anderson argues in the report that inequity in the distribution of Pentagon spending is “a creator of extremes from the standpoint of political economy. It guarantees depletion and deprivation for large areas of the country and provides an unproductive stimulus for areas in which military contractors and installations are located.”

He said the defense deficits suffered by many areas have contributed to their financial problems.

Of California’s 23 metropolitan areas, the report said, 13 are in a net loss position, including Los Angeles-Long Beach, Anaheim-Santa Ana, Oxnard-Ventura and San Francisco. Cities with surpluses include Riverside-San Bernardino, Santa Barbara and San Diego.

In part, spending on foreign military bases is responsible for the deficits, Anderson acknowledged in an interview. Because the Defense Department maintains large foreign forces, the overall spending in the United States as a whole will unavoidably be in deficit.

Anderson said he could not explain why the spending totals he reported for Los Angeles are smaller than those reported by the California Commission on State Finance.

Michael Rich, a defense procurement expert and vice president at RAND Corp., said many federal programs could be faulted for regional inequities in spending patterns, citing agricultural subsidies, water projects and the space program. He also questioned whether the economic impacts reported by Anderson might be different if economic multiplier effects, retirement benefits and health benefits were taken into account.

“The report sounds simplistic,” Rich said. “It is an unusual standard to apply.”

A Pentagon statement said its efforts benefit the whole nation.