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Do increased investments in missiles, fighter jets, and other military resources really create American jobs? Do they pose economic risks that could undermine US interests over time?
US defense spending is said to bolster economic development and foster job creation, but some analysts caution that increased defense spending may not be a boon for economic growth. Hiring challenges, supply chain snarls, and other issues are delaying defense contractors’ peak production.
Here’s a look at whether defense spending helps the economy or not.
United States Defense Spending
With geopolitical crises erupting worldwide, the government faces intense pressure to ramp up US defense spending.
Background
The US Government allocated $816.7 billion for defense spending in 2023 to cover a range of expenses including weapons, equipment, and personnel. These expenditures ballooned in response to recent geopolitical crises, including Russia’s 2022 invasion of Ukraine and Hamas’s October attack on Israel.
The US has given Israel $3.8 billion a year in military aid since 2016, and Ukraine over $44 billion since Russia’s invasion—the latter representing less than 0.5% of America’s 2023 defense budget. Experts say that most of this funding stays in the US, going toward jobs with domestic manufacturers.
Despite this, Congressional Republicans recently blocked President Biden’s request for an extra $64 billion in military aid for these countries, demanding stricter border controls and increased scrutiny over funds assigned to Ukraine.
The Economic and Security Boon of Defense Spending
Some experts and President Biden argue that US defense spending isn’t just beneficial but crucial for the prosperity and security of the US. They maintain that it:
1. Bolsters domestic industries and job creation.
2. Enhances national security.
The Hidden Costs of Defense Spending for the US Economy
However, analysts and other experts counter that the reality of defense spending is more complex, and doesn’t always yield the immediate positive results that people expect.
1. Current job creation is small relative to the size of the defense industry. This is because, more than a year after Russia invaded Ukraine, defense companies are still grappling with securing and retaining skilled talent in a tight labor market. Hiring candidates who can get required security clearance and are also willing to relocate to remote weapons production sites has proven challenging.
2. The economy won’t feel the benefits of defense spending for years. Defense contractors face a number of additional hurdles that are stalling peak manufacturing, including supply chain disruptions, as well as the need to reactivate dormant production lines and build new factories. As a result, it may take years to ramp up production enough to meet demand.
Looking Ahead
Some argue that prioritizing defense spending now to support Ukraine’s resistance against Russia will avoid potentially higher costs later by preventing a future where direct American military involvement becomes necessary.
However, others contend that increased defense spending may eventually strain the US economy, as continued borrowing to fund it could trigger negative economic effects such as higher interest rates, reduced spending in other sectors, and slowed economic growth. Ultimately, this could lead to higher taxes and program cuts, leaving less money in the pockets of American businesses and individuals.
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