The IMF estimated how much economic activity shrinks in a country directly hit by a war.
Telling us that wars are worse than financial disasters, they estimate that a wartime contraction initially is 3% and then, after 5 years, the plunge goes down to 7%:
Continuing, in a recent blog and a much longer report, the IMF details the prevalence and impact of war.
Impact of War
Number
The number of conflicts is on the upswing:
Cost
And so too is their cost:
However, the results vary because it all depends on whether the spending occurs during wartime or peacetime:
Our Bottom Line: Tradeoffs
To see actual defense spending tradeoffs, we can look at President Trump’s FY2027 budget proposal.
The Washington Post reports that defense spending, up by 42.2%, would be a gob smacking $1.5 trillion. On average, the cuts to nondefense spending are close to 10%.
While defense spending is way up, much smaller amounts (but gargantuan proportions) of discretionary spending are down. For example, the 19% USDA cut equals $4.9 billion while the EPA’s 52% cut is $4.6 billion:
Below, the $350 billion amount was added to the $1.5 trillion for defense. In addition, the mandatory spending that includes Social Security and Medicare have no structural changes that prevent their trust funds’ insolvency:
However, more borrowing necessitates an elevated net interest expense.
So where are we?
We have two tradeoffs:
1. The first tradeoff is the unequal dollars. The defense increase is not close to the program cuts since, for example, we have to multiply the $4.6 billion EPA cut by 326 to equal the defense total of $1.5 trillion.
Or, as xkcd said:
2. And finally, our peacetime pop in defense spending actually might boost GDP. However, the tradeoffs could make economic growth less appealing.
My sources and more: Thanks to my IMF email for inspiring today’s post. For the facts, their blog and this IMF report were ideal. Please note that I used AI to generate my “Bottom Line” graphs. But I did check its numbers in this Washington Post article and through Inside Defense.
The post What We Need to Know About Defense Spending Tradeoffs appeared first on Econlife.
Nicole Byers is an entertainment enthusiast! Nicole is an entertainment journalist for the Maple Grove Report.
