US Foreign Policy

Defense Spending and the Economy: Does the Defense Dollar Make a Difference?

The impact of defense spending on the economy has become part of the growing debate about the need to put defense on the table to achieve deficit reduction.  It’s not a new subject; the argument that defense is important to jobs, research, economic growth has been used for years to justify high levels of spending.   The argument is flawed; it has been flawed for decades now. 

Sometimes old research becomes relevant.  In 1987, Gordon Adams and David Gold wrote a report on defense and the economy for the Defense Budget Project.  It is still salient to the debate on today’s defense budget build-down.   Defense Spending and the Economy: Does the Dollar Make a Difference, is worth a second-look.

 With permission from the authors, The Stimson Center has posted this report.



“A careful evaluation of the relationship between defense spending and the economy is overdue. This Defense Budget Project report is just such an evaluation, based on the ample body of existing data. Briefly, this review suggests that arguments have been vastly overstated both by the Defense Department and by the critics of defense spending. The impact on the economy of changes in defense spending is affected but the context within which such changes occur. This question of context is crucial in evaluation defense economic issues. By and large, major changes in the U.S. economy appear to be far more strongly influenced by broader events and economic developments- national and international- than buy variations in the level of defense spending. The central problem of critics and defenders of defense spending alike is that their work attributes too much importance to the defense dollar, using evidence that is too limited in scope.”




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