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defense

Beyond Demand: The Supply-side Benefits of Military Spending

World War II gets credit for dragging the United States out of the Great Depression. Despite all the clear negatives of having to become embroiled in such a conflict, the demand created during the war resuscitated an economy that had been dormant since the crash of 1929.

Today, the military continues to demand high levels of labor, investment, goods, and services. And this demand still plays a role in supporting the U.S. economy. Military spending provides its personnel and suppliers with the resources to purchase additional goods and services from others, and so on.

However, according to former Federal Reserve Chairman Ben Bernanke, it is the supply side, not the demand side, through which U.S. military spending creates benefits for the U.S. economy.

These supply-side benefits are primarily created not by spending on current strength of arms, but by investing in capabilities for the future. Chiefly, this comes through defense R&D. Not all the benefits of new technology developed by the military are constrained to the defense sector. Instead, they “spill over” to the private sector. At a recent event hosted by the Brookings Institute focused on defense spending

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