US Foreign Policy
Report

Increasing the U.S. defense budget won’t stimulate the economy

The next war–the battle for even more defense spending–is now under way. Major weapons
program manufacturers are worried that Defense Secretary Robert Gates may be serious about
looking for “hard choices” that need to be made in the Pentagon’s procurement program. For
their part, the armed services, which have seen the defense budget more than double in the last
eight years, are worried that the Obama administration may slow this rapid rate of growth–a fear
made more real by a White House proposal to grow the defense budget by only $15 billion in
fiscal year 2010, instead of the $72 billion the service chiefs want.

To win support for their argument, those who advocate for continually increasing the defense
budget are adding their voices to the fracas about the economic stimulus package now before the
Senate–just add a bunch of defense dollars to the stimulus package and it will make a significant
contribution to making our economic troubles go away, they maintain.

This is not, however, necessarily such a logical conclusion. In economic terms, there’s little evidence demonstrating that a large defense spending binge boosts the national economy. Data reviewed by the Congressional Research Service in a little noticed 2008 study indicated that only major wars such as World War II have significant macroeconomic impacts. More largely, over time, the share of the U.S. economy dedicated to defense spending has continually fallen since the 1950s, giving the defense dollar less and less significance to the overall economy.

Further expanding the defense budget is not only a poor policy choice, but also does not promise the economic stimulation that some of its proponents have touted.

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