Watson Institute for International and Public Affairs
Costs of War

Impact on Public Investment

In 2000, the Pentagon’s total assets – buildings, aircraft, ships, vehicles, computers, and weapons – were valued at $904 billion. Total assets rose to $1,245 billion by the end of 2009, an increase of $341 billion in current dollars.

Public investment in non-military assets – all the public buildings, roads, mass transit systems, water and sewer systems, public utilities, recreation facilities, and so on – has held steady since the mid-1970s, but at about half the rate of accumulation of the 1950s and 1960s.   

Investments in core infrastructure have a direct impact on the performance of the private economy. The private sector benefits from public investments in roads, water systems, and other goods. Such benefits are in addition to the direct benefits that public investment confers to the population: roads help people get around and improve the efficiency of businesses.

While the private economy benefits from military spending on durable, physical assets (defense contractors being an obvious example), there are no “spill-over effects” in terms of the long-run productivity of the rest of the private sector. 

If the military investments over the first decade of the wars had been made in core public economic infrastructure instead, this would have boosted the current value of key public assets by over 7 percent, producing $150 billion in increased productivity to the private sector.


Key Findings

  • A 1 percent increase in investment in core public infrastructure would increase the productivity of the private sector by up to 0.2 percent.

  • While investment in military assets produces economic gains, investment in non-military assets stimulates comparatively more economic growth in the private sector.

  • If public investments in military assets had instead been made in public education, this would be enough to return the country’s schools to good condition.

Recommendations 

  • To clarify the policy choices being made, the Congressional Budget Office (CBO) should produce an annual cost-benefit analysis of investments in military assets versus investments in alternative public infrastructure such as public education.

(Page updated as of February 2015)