Abstract
In our hypothesis the defense budget must reduce the traditional threat and influence the economic. This research would like to see if the defense spending will influence the national economics through economic growth by demand side approach. By assuming the natural balance of power, the traditional threat come not only from military capabilities but also balanced by their economic power. The equation model formed to capture the influence of defense spending to economics growth. The regression describes that military spending had an impact on economic growth. Increase in the level of traditional threat is not reduce economic growth. The Indonesian defense budget give impact on the national economics, and the traditional threat is in small variation. But, the national defense budget still needs to be increased. This makes production could be stable, and the economic actors still feel safe doing the business.
Highlights
Defense budget and economy are two variables that mutually reciprocal
Defense spending not depress economic growth and the traditional threat did not leave a negative effect on growth
With the mutual relations, increasing the defense budget influenced by improving the economy, and the economic improvement is affected by the safe atmosphere of business
Summary
Defense budget and economy are two variables that mutually reciprocal. Without defense it would appear threat, so the economy can not run properly. Defense budget can only be improved if the national income increasing. The budget for national defense is one of the important government's policy. There are two arguments for the impact of defense spending. The relation of government spending on defense with economic has been studied with a wide range of economic model, but the result is still contradictory for certain, whether military spending support or depress the economy. This study will analyze the influence of government spending on defense to national economics toward economic growth. The results will be analyzed and could be developed for better national defense planning policy
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