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Report Shows Increased Military Spending Slows Down Economy

Gosh, another pesky fact-based report to get in the way of a popular right-wing talking point. Any of you think Rush Limbaugh or Sean Hannity will cor

Gosh, another pesky fact-based report to get in the way of a popular right-wing talking point. Any of you think Rush Limbaugh or Sean Hannity will correct themselves? Me neither.

Center for Economic and Policy Research:

For the report, The Economic Impact of the Iraq War and Higher Military Spending, by economist Dean Baker, CEPR commissioned Global Insight to run a simulation with its macroeconomic model.[..]

The projections show the following:

-- After an initial demand stimulus, the effect of increased military spending turns negative around the sixth year. After 10 years of higher defense spending, there would be 464,000 fewer jobs than in the baseline scenario with lower defense spending.

-- Inflation and interest rates are considerably higher. After 5 years, the interest rate on 10-Year Treasury notes is projected to be 0.7 percentage points higher than in the baseline scenario. After 10 years, the gap would rise to 0.9 percentage points.

-- Higher interest rates lead to reduced demand in the interest-sensitive sectors of the economy. After 5 years, annual car and truck sales are projected to go down by 192,200 in the high military spending scenario. After 10 years, the drop is projected to be 323,300 and after 20 years annual sales are projected to be down 731,400.

-- Construction and manufacturing are the sectors that are projected to experience the largest shares of the job loss.

"It is often believed that wars and military spending increases are good for the economy," said Baker. "In fact, most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment."

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