Defense Spending and the Economy
Abstract
Mr. Chairman, I am pleased to appear before you today to discuss the economic outlook and the influence of rising defense budgets on that outlook. In the First Concurrent Resolution on the Budget for Fiscal Year 1984, the Congress provided for annual real growth in defense budget authority of 5 percent a year through 1986. CBO's most recent economic forecast, released last August, assumed these defense increases and the other fiscal policies of the first resolution. Our forecast projects continued growth in the economy and moderate inflation for one or possibly two years, despite federal deficits that are very large by historical standards. Earlier Administration budgets have proposed even more defense spending and less nondefense spending than provided in the resolution. Additional emphasis on defense would, of course, promote defense-intensive sectors of the economy at the expense of others, but CBO believes the economy could accommodate such shifts without significant adverse effects on macroeconomic variables such as employment and long-term productivity gains. Thus, the choice of a mix of defense and nondefense spending must depend on a political judgment about whether added defense spending contributes enough to national security to justify its direct cost. From the economic standpoint, the question is not the desired level of defense spending but how it is financed: whether by running higher deficits, by reducing federal nondefense spending, or by increasing taxes.
Document Details
- Document Type
- Technical Report
- Publication Date
- Dec 07, 1983
- Accession Number
- ADA530715
Entities
People
- Rudolph G. Penner
Organizations
- Congressional Budget Office