Yeah, that would not be news to any economist, but why is the negative impact of military spending on the economy never raised in political debates? President Bush has said that he won't do anything serious to reduce greenhouse gas emissions because it would hurt economic growth, and that was the end of his discussion. But, for some reason, the fact the jobs the growth and jobs that are lost because of his wars is never even raised as an issue. CEPR commissioned Global Insight (formed by the merger of WEFA and DRI, two of the country's oldest econometric forecasting firms) to simulate the impact of an increase of defense spendning equal to 1 percent of GDP (approximately the increase associated with the wars). The model shows that after an initial stimulus, the impact of higher spending turns negative around the 6th year. By the 10th year, payroll employment is down by 460,000 jobs, By the 20th year, it is down by 670,000. The construction and auto industries are the hardest hit sectors. Higher defense spending is also projected to lead to a larger trade deficit. The cumulative increase in the trade deficit over the 20-year period is more than $1.8 trillion (2000 dollars).
--Dean Baker
