This section explores the link between the continued American commitment to large-scale military spending and the apparent decline of the American economy. Indeed the assumption that war preparation benefits everyone has been a fundamental part of American political culture throughout the Cold War. Military spending raises three problematical issues for the U.S. economy. This is what critics call the opportunity costs of the defense budget--costs derived from the fact that a dollar one spend on defense is ultimately a dollar one do not spend on something else. The performance requirements and production norms of high-tech military production make it increasingly difficult to spin off products. The increasing size of military research and development has also forced up the price of U.S. goods abroad. It is time to recognize that the size of the U.S. military investment makes it a closet industrial policy. But the pressure by defense contractors and the military for new weapons as well as the procurement processes of the Pentagon have changed the composition of military budgets. Increases in military spending therefore prevent the inflation rate from falling as rapidly as it might in recessionary periods as well as accelerating the rate of price increases in expansionary periods.
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