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Wed Jan 30, 2013, 04:34 PM

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

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

22 replies, 1551 views

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Arrow 22 replies Author Time Post
Reply Why do cuts in defense spending hurt the economy? Pretend I'm a 5th grader. (Original post)
raccoon Jan 2013 OP
patrice Jan 2013 #1
sharp_stick Jan 2013 #2
jwirr Jan 2013 #3
immoderate Jan 2013 #4
jberryhill Jan 2013 #6
Recursion Jan 2013 #10
jberryhill Jan 2013 #15
karynnj Jan 2013 #11
Recursion Jan 2013 #13
Recursion Jan 2013 #12
jberryhill Jan 2013 #16
immoderate Jan 2013 #20
Recursion Jan 2013 #21
immoderate Jan 2013 #22
Egalitarian Thug Jan 2013 #5
Recursion Jan 2013 #7
karynnj Jan 2013 #8
Blecht Jan 2013 #14
Rex Jan 2013 #9
reformist2 Jan 2013 #17
baldguy Jan 2013 #18
coalition_unwilling Jan 2013 #19

Response to raccoon (Original post)

Wed Jan 30, 2013, 04:41 PM

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.

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Response to raccoon (Original post)

Wed Jan 30, 2013, 04:45 PM

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.

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Response to raccoon (Original post)

Wed Jan 30, 2013, 04:51 PM

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.

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Response to raccoon (Original post)

Wed Jan 30, 2013, 04:52 PM

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

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Response to immoderate (Reply #4)

Wed Jan 30, 2013, 04:59 PM

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

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Response to jberryhill (Reply #6)

Wed Jan 30, 2013, 05:05 PM

10. I dunno. The Internet? GPS?

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

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Response to Recursion (Reply #10)

Wed Jan 30, 2013, 05:15 PM

15. That's small potatoes


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

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Response to immoderate (Reply #4)

Wed Jan 30, 2013, 05:06 PM

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

Employees earn money and then buys goods and services.

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Response to karynnj (Reply #11)

Wed Jan 30, 2013, 05:08 PM

13. Plus the investments that are made

I think GPS has revolutionized logistics, for instance.

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Response to immoderate (Reply #4)

Wed Jan 30, 2013, 05:07 PM

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

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Response to Recursion (Reply #12)

Wed Jan 30, 2013, 05:18 PM

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.

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Response to Recursion (Reply #12)

Wed Jan 30, 2013, 05:53 PM

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

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Response to immoderate (Reply #20)

Wed Jan 30, 2013, 06:09 PM

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

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Response to Recursion (Reply #21)

Wed Jan 30, 2013, 06:24 PM

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

--imm

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Response to raccoon (Original post)

Wed Jan 30, 2013, 04:59 PM

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.

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Response to raccoon (Original post)

Wed Jan 30, 2013, 05:02 PM

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.

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Response to raccoon (Original post)

Wed Jan 30, 2013, 05:03 PM

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.

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Response to karynnj (Reply #8)

Wed Jan 30, 2013, 05:11 PM

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.

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Response to raccoon (Original post)

Wed Jan 30, 2013, 05:04 PM

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.

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Response to raccoon (Original post)

Wed Jan 30, 2013, 05:20 PM

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.

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Response to raccoon (Original post)

Wed Jan 30, 2013, 05:22 PM

18. This is why:



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

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Response to raccoon (Original post)

Wed Jan 30, 2013, 05:23 PM

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.



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