Help or Hurt the Economy?

Many people believe war is good for the economy. At first glance, one could easily argue the economy is stimulated when we enter into a war. Let's suppose that the economy is in a recession. The unemployment rate is high and production is down. But then the government decides to enter into a war. This calls for workers to supply the soldiers with clothing, vehicles, weapons, and military supplies which creates jobs for people who did not have jobs before, therefore lowering the unemployment rate. With the unemployment rate down, people have more money to spend creating a boost in the economy. I am surprised to say that the idea of war helping an economy is actually a myth. 

The question many people have is how could war actually hurt the economy when so many say that it stimulates the economy? World War II came directly after the Great Depression, so war must have been the driving force to pull the economy out of a depression. However, more current history describes a different scenario. There was substantial economic growth during the 1990's when, with the exception of the Gulf War in 1991, we were at peace. Former Federal Reserve Chairman, Alan Greenspan warned that a prolonged conflict in war in the Middle East would hurt the economy. He explained that "you risk consumer confidence deteriorating" if involved in war for a long period of time. This in turn would effect financial markets and consumer spending. 
But if there is economic spending on the military during war, how does that affect consumer confidence? The New Republic states, it is "because of what economists call the 'broken window fallacy'. Specifically, if a window in a store is broken, it means that the window-maker gets paid to make a new window, and he, in turn, has money to pay others. However, economists long ago showed that – if the window hadn’t been broken – the shop-owner would have spent that money on other things, such as food, clothing, health care, consumer electronics or recreation, which would have helped the economy as much or more. If the shop-owner hadn’t had to replace his window, he might have taken his family out to dinner, which would have circulated more money to the restaurant, and from there to other sectors of the economy. Similarly, the money spent on the war effort is money that cannot be spent on other sectors of the economy." During war, there is economic growth in the military sector, but shifts resources away from consumer and investment spending that would actually grow the economy. Defense spending has accounted for almost all job creation in the economy over the last decade. However, Michael Mandel states, "between 1999 and 2009, private sector employment grew only 1.1% which is the slowest growth in a post-depression period."

While a war can provide a short-term boost to the economy, it has an adverse effect on the economy in the long run. Mike Moffatt states, "The extra money spent on the war is money that will not be spent elsewhere. The war can be funded in a combination of three ways: increasing taxes, decrease spending in other areas, or increasing the debt." All three of these options will negatively affect the economy in the long run. Increasing taxes reduces the amount of money consumers have to spend. Decreased spending on social programs funded by the government reduces the benefits to recipients thereby reducing the money they have to spend in other areas. Increasing the government debt assures that taxes will have to be increased or spending reduced in the future. 
Therefore, war is not beneficial to the majority of Americans. They find themselves with fewer dollars to spend and less confidence that the money will be there in the future. With less money circulating in the economy, there is less economic growth in the long run.