ABSTRACT
Defense policy depends on the resources allocated to the defense budget, and the various categories of defense spending give life (and profits) to a set of interests, notably including the defense industry, that actively participate in the American political process. In modern America, defense is a cyclical business, with years of booms and years of busts. The cycles shape industry behavior and frustrate procurement reforms. Economists and policy analysts debate the effect of defense spending, particularly acquisition spending, on the overall economy. Traditionally increases in government spending on shipbuilding and aircraft production were viewed as valuable economic stimuli that could help manage the business cycle. The defense industry over time developed its own style of business-government relations that built on a few key attributes of American culture and the American political process. Defense is a government-regulated industry, not a government-managed one. Government auditors carefully monitor the costs, purchases, and profits of defense contractors.
