I found Wednesday's U.S. GDP report very interesting. For those who do not know, GDP for the fourth quarter of 2012 shrank by 0.1 percent. That said, economists and serious investors
did not seemed concerned about it. Consumer spending and business investing grew pretty robustly, and one drag on growth, shrinking business inventories, is likely not to be repeated now that American spending is growing.
What struck me the most was the contraction in defense spending. Defense spending declined 22.2 percent, the largest drop since 1972. This is
before possible sequestration, which would slash the military budget further.
I am mostly interested in what this means for American culture, and how it views the military. In the past, defense spending was a sacred cow, and was almost never cut. Now, there are talks about trimming the defense budget, and indeed, it appears to be happening on its own. It seems as if Americans accept this far more than, say, a cut to Social Security or Medicare, which is not currently at risk of budget cuts.
Could this signal a new era in America's relationship with its military? Is the U.S. entering a stage of demilitarization? Do you think these spending draw downs mean a genuine decline of the U.S. military, or that it will simply become more efficient and adapt?
There have also been large cuts in state and local government spending during that same time which helps explain the shrinkage.