history rhymes. (Mark Twain once said, “History may not repeat itself, but it rhymes.” Or something very close.)
After WWII, the country quickly underwent a massive disarmament. This lasted until the start of the Korean War, or about five years. After that, defense spending got ratcheted up again and didn’t come down permanently, at least relative to GDP and tax receipts, until after the end of the Cold War in 1989.
Since then, we went from massive deficits to massive surpluses and enjoyed an unprecedented run of prosperity. We were getting into an old-fashioned recession prior to the WTC attack anyway, but now not only does it look like we’ll get that recession, it looks like we’ll also get a large and continuing increase in defense spending, along with a massive investment in security by private business. So just like the WWII peace dividend, this one is about to go away too.
This is necessary, yes. But will it drop us down to the point where we will never again see eight years in a row of prosperity again? Or will it actually be a good thing, economically speaking?