Why do cuts in defense spending hurt the economy? Pretend I'm a 5th grader.

[raccoon]

I have some ideas but I'd like to hear Du's wisdom.


WASHINGTON (AP) -- The U.S. economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles.

http://finance.yahoo.com/news/us-economy-shrinks-0-1-133115372.html

[patrice]

1. All of those "independent" contractors who did as all of the career-advice books tell you to,

create your own job by studying a situation and finding something unique to sell to that enterprise whether it actually needs it or not, . . . . all of those hack, cough, choke . . . "independent" contractors who developed themselves within the constructs of MIC and, in some cases, even received no bid, guaranteed cost+ 15% contracts, have been recognized for the parasites that they are on the backs of the enlisted ranks and have been losing their hold on the Pentagon's jugular, so those incomes are now out of the economy and less spending is, thus, going on.

[sharp_stick]

2. Because the defense industry is huge

Here in CT we have massive organizations like Pratt and Whitney, Sikorsky and Electric Boat each employing hundreds to thousands of people. Add to that the ancillary companies like Bourdon Forge and Kaman Aerospace that employ many more.

Cuts in any major industry will impact the economy through layoffs and less spending.

Just my two cents.

[jwirr]

3. Military spending is still spending. To cut it would mean less spending but there is

another factor here that should be considered. Military spending is often for equipment that never is used. Just sets there waiting for a war. Recently of course we have had plenty of wars to satisfy them. Domestic spending, on the other hand, is usually for things we need and use daily.

[immoderate]

4. Inasmuch as people get paid, and spend the money, that "helps" the economy.

Because what they spent gets added to the GDP.

HOWEVER-

Defense hardware, the more it is used, is a drain on the economy. Moreover, if the same money is channeled into civil hardware, it has a multiplier effect through the economy.

Compare a tank to a tractor. The tank, when used, crushes things and blows them up. The personnel rarely contribute productive work. The tractor, OTOH, may build roads, harvest crops, transport produce, etc. It enables others to have jobs by creating a demand for labor.

--imm

[jberryhill]

6. Right... it is stimulative, but something of a dead end

[Recursion]

10. I dunno. The Internet? GPS?

Lots of stuff that's important to the economy as a whole comes from military spending

[jberryhill]

15. That's small potatoes

Compared to the day-in, day-out stuff like building a nuclear submarine.

[karynnj]

11. there is a multiplier effect for military spending as well

Employees earn money and then buys goods and services.

[Recursion]

13. Plus the investments that are made

I think GPS has revolutionized logistics, for instance.

[Recursion]

12. I'm pretty sure the Internet is a net positive for the economy (nt)

[jberryhill]

16. Since you are going to keep repeating this

It's worth pointing out that neither the internet nor GPS are representative of what "military spending" is about. DARPA's budget is tiny. There is a much better ROI on civilian space programs in terms of innovation and benefit per dollar.

[immoderate]

20. The military was involved in the development of the net, but...

There were parallel systems under development by civilian entities as well. They didn't invent Tang! either. Or microchips.

--imm

[Recursion]

21. There's a reason nobody remembers Banyan Vines

The private sector had incentives that acted against effective net design, and boy did it show

[immoderate]

22. I was thinking of the system at NPL, in Britain.

--imm

[Egalitarian Thug]

5. They don't. They hurt the numbers that are used to guess about the state of the economy.

Also, "the biggest cut in defense spending in 40 years" is likely the slowest growth in military spending.

Devil. Details.

[Recursion]

7. So until recently I contracted for the Navy

I did circuit diagrams for their hovercraft fleet. With the money they paid me, I bought food and beer and XBox games. If I were still at that company, I would be laid off now, and not buying food or beer or XBox games.

[karynnj]

8. Cuts in spending for ANYTHING mean fewer dollars going out

that people earn for the projects funded or that are given to people who need assistance. If costs are cut - no matter what they are - that means someone gets less money, they buy and pay for fewer services, so there are direct and indirect losses.

[Blecht]

14. Exactly right

That's why there should always be MORE spending in a recession.

If we're going to cut military spending, spend that and MORE on infrastructure and other things that benefit society.

Net cutting of spending is the exact opposite of what needs to be done to get the economy back on track, but it's what all the "smart" people in charge keep saying we need to do.

We are fucking doomed.

[Rex]

9. Because.

The MIC has a direct impact on the economy. If we cut the MIC budget, then that is less going to private contractors etc.. If there is less money going to companies, less spending occurs. Less employees needed...less is less when part of your government is such a large part of your economy. Sadly, it has to be our War Machine Inc. that has so much intertwined with the economy of everyday working class people.

[reformist2]

17. Let's be careful here: If we can get Repugs to understand that defense spending helps the economy...

...then they're basically admitting that Keynesian economics works.

[baldguy]

18. This is why:

50% of our federal discretionary spending goes to the military.

[coalition_unwilling]

19. There's something called "The General Macroeconomic Equation," laid out below:

GDP = C + G + I + (X-I)

where

GDP = Gross Domestic Product
C = Personal Consumption
G = Government Spending
I = Business Investment
X= Exports
and
I = Imports

Rudimentary math says that a cut to any of the terms or the parenthetical expression 'X-I' on the right side of the equation (in this case, 'G') results in an equal reduction in the left-hand term ('GDP').

When an economy produces fewer goods and services, i.e., GDP contracts, that's generally bad for everyone except decadent and parasitical 1%ers who get most of their income from bond interest and stock dividends instead of by working like ordinary folks have to.