ABSTRACT

Financing Issues and Economic Effects of Past American Wars [November 7, 2001]   [open pdf - 131KB]

The increased government outlays associated with wars can be financed in four ways: through higher taxes, reductions in other government spending, government borrowing from the public, or money creation. The first two methods are unlikely to have an effect on economic growth (aggregate demand) in the short run: the expansion in aggregate demand caused by greater military outlays is offset by the contraction in aggregate demand caused by higher taxes and/or lower non-military government spending. Just as wars typically boost aggregate demand, the reduction in defense expenditures after a war typically causes a brief economic contraction as the economy adjusts to the return to peacetime activities.

Report Number:
CRS Report for Congress, RL31176
Author:
Publisher:
Date:
2001-11-07
Series:
Copyright:
Public Domain
Retrieved From:
Via E-mail
Format:
pdf
Media Type:
application/pdf
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