Does Defense Spending Stimulate Anything Other than Military Contractors' Bank Accounts?


While many conservative Republicans rightly sneer at Keynesian-derived stimulus spending as counterproductive, they nonetheless often create a loophole for something called "defense spending."

In thinking that government spending can generate long-term economic growth, they end up being similar to stimulatarians like Paul Krugman, who dings GOPpers on this inconsistency while entertaining his own bizarre fantasies of alien invasions, dreams of a World War to crank up economic growth, and misimpressions that flattening the World Trade Center was going to revive the building industry (seriously).

Reason columnist and Mercatus Center economist Veronique de Rugy provides some interesting charts that plot economic growth and military spending:

Politicians and pundits have often implied that reductions in defense spending would shrink the gross domestic product (GDP) and further weaken the already-weak economic recovery. Based on this week's chart series, their concerns don't appear to pan out. In fact, over the past 30 years, real economic growth has grown and shrunk irrespective of defense-spending levels.

Using data from the Office of Management and Budget, these charts highlight general trends between defense outlays and real GDP.

The short version of de Rugy's findings? Defense spending is no more super-fantastic than other sorts of government spending when it comes to goosing the economy. Here's her second chart:

And just to drive home the trifecta, here's one final chart:

De Rugy's full explanation of the above is here.