National Defense Spending - Is an Increase Necessary?

 National Defense Spending - Is an Increase Necessary?

Written by: Dom D. 

The conflict between Russia and Ukraine has raised defense spending not only across the warring countries, but in the United States as well. The graph below displays national defense spending in 2020 to showcase just how much it increases across a span of 2 years: During the month of March following the initial invasion, president Joe Biden called for a 30 billion dollar increase on national defense spending, from 782 billion to 813 billion. The unanticipated 4% increase in budget made some happy, but several members of congress called for a minimum 5% increase and as much as a 7% increase. Though the U.S. has made it clear that they intend to stay out of armed conflict with Russia, national defenses are still being bolstered in response to the war. This supposed conflict of interest raises an important question: Is this increase in spending necessary, and when it takes effect, what will it do to the economy?

To trace the roots of whether the spending is necessary, it is important to refer to the fiscal policy and the allocation of funds in relation to achieving macroeconomic objectives. The federal budget, which is used to sustain economic growth and price level stability, plays a large role in government spending tactics. Increasing spending toward the military is an example of expansionary fiscal policy, but this can have some negative ramifications for our current economic climate. The United States is currently facing an inflation crisis, with energy bills increasing by 30.3%, food prices increasing by 9.4%, and vehicle costs increasing by 13.2%. An expansionary fiscal policy could damage the economy by further widening the inflationary gap we already face. As mentioned earlier, there is talk about needing to increase the national defense spending further, even more than what Biden has already proposed. The argument to increase spending correlates with expansionary fiscal policy due to the fact that the addition of this policy would cut tax rates while also increasing government spending in order to “put more money into consumers' hands to give them more purchasing power; It also reduces unemployment by contracting public works or hiring new government workers, both of which increase demand and spurs consumer spending, which drives almost 70% of the economy” (Amadeo, 2022). While this sounds like a good thing, more disposable income and job availability will only lead to further inflation. As shown by the graph below, increasing defense spending will increase consumer demand and shift the aggregate demand curve to the right, increasing the inflationary gap already seen.

Now that we have established how the increase occurs for national defense spending and the strong forces behind this change, is it now time to figure out exactly why Biden, the rest of congress, and the general public want to see this increase. There is the argument that increasing national defense spending could still benefit the economy in some way, but there are still more effective means of stimulating or contracting an economy than through military funding. The consensus among economists is that, “A larger budget gives the country more funds to promote and defend its global interests, but it also reduces funds available for domestic programs, including those that might do more to boost economic growth” (Rooney et. al, 2021). Military spending may provide new jobs as a side-effect, but its main purpose is for defending our global interests, and the money would be better spent to benefit jobs programs, if necessary. With the United States’ position in the conflict firmly neutral and military spending not being an effective medium for economic change, I see no reason as to why national defense spending should increase any further.

Works CIted

Mcleary, Paul, Lee Hudson, Connor O’Brien and Bryan Bender. “Biden requests $813B for national defense.” Politico, March 28, 2022 

https://www.politico.com/news/2022/03/28/biden-requests-largest-defense-budget-00020859

Amadeo, Kimberly. “Expansionary Fiscal Policy and How It Affects You.” The Balance, April 5, 2022

https://www.thebalance.com/expansionary-fiscal-policy-purpose-examples-how-it-works-3305792 

Rooney, Bryan, Grant Johnson, and Miranda Priebe. “How Does Defense Spending Affect Economic Growth?” RAND Corporation, 2021. https://www.rand.org/pubs/research_reports/RRA739-2.html 

“United States Inflation RateApril 2022 Data - 1914-2021 Historical - May Forecast.” United States Inflation Rate - April 2022 Data - 1914-2021 Historical - May Forecast, https://tradingeconomics.com/united-states/inflation-cpi