Analysis of the Economic Impact of U.S. Military Deployments and Defense Spending

Based on the latest news and data, I will systematically analyze the impact of U.S. domestic military deployments on defense spending and economic stimulus.

According to the latest reports from Xinhua News Agency and U.S. media, the U.S. Department of Defense has ordered approximately 1,500 paratroopers from the Army’s 11th Airborne Division to be on alert, and they may be deployed to Minnesota [1][2]. These soldiers are stationed in Alaska, specialize in cold-weather operations, and this deployment is directly related to recent local protests triggered by immigration enforcement actions.

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The U.S. Fiscal Year 2026 National Defense Authorization Act (NDAA) has been passed, authorizing spending of

for the Department of Defense, nuclear security programs, and related national security activities, which is approximately $8 billion higher than the presidential budget request [3][4]. More notably, the Trump administration is pushing to increase the defense budget to , which would set an all-time high in U.S. history [5].

• The proportion of defense spending to GDP is projected to rise from approximately 3% to
  3.3%
  [6]
• Defense spending for Fiscal Year 2026 is proposed to increase by approximately
  15%
  [7]
• The growth in defense budget mainly comes from defense funding appropriated under the “Beautiful American Economy Act (OBBBA)”

The defense budget mainly includes the following areas [5]:

• Operations and Maintenance Costs
• Military Personnel Costs
• Procurement Costs
• Research, Development, Test and Evaluation Expenditures
• Military Construction and Facility Maintenance
• Nuclear Weapons Modernization (such as the “Golden Dome” missile defense system)

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According to economic research from TD Bank Canada, military deployments have

[7]:

Impact Factor	Short-Term Effect	Long-Term Effect
GDP Growth Contribution	+0.2 percentage points (2026)	+0.1 percentage points (2027-2029)
Job Creation	Approximately 117,000 positions (taking Louisiana as an example)	Sustained but declining
Local Tax Revenue	$707 million increase (Louisiana case)	Stable contribution

• Military-related spending in Fiscal Year 2024 generated an economic impact of
  $17 billion
• Growth of
  77%
  since 2021
• 52%
  increase in employment, with over 117,000 jobs

Military bases and facilities have a significant multiplier effect on local economies. According to the latest research from California [9]:

• Direct Spending:
  $56.8 billion
• Direct Employment:
  Approximately 339,000 people (including civilian and military personnel)
• Indirect Impacts:
  Defense activities continue to attract investment in advanced manufacturing, aerospace, and technology sectors

The impact of military procurement spending on the economy is undergoing

[10]:

• Procurement spending has shown a more positive economic impact in recent years
• Defense R&D investment has driven overall innovation activities
• Spillover effects of military-related technologies (e.g., the origins of the internet, GPS, and other technologies)

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1. Job Creation:
   Spending on military personnel has a
   moderately positive effect
   , which has been more evident since 2012 [10]
2. Technological Innovation:
   Defense R&D makes positive contributions to productivity and international technology spillovers
3. Infrastructure:
   The construction of military facilities drives the development of local infrastructure
4. Supply Chains:
   Supports critical supply chains and manufacturing employment

1. Debt Pressure:
   The size of U.S. national debt has exceeded $36 trillion, and high military spending may exacerbate fiscal burdens [5]
2. Crowding-Out Effect:
   May reduce private investment and public spending on education, healthcare, and other areas
3. Opportunity Cost:
   There is a “guns vs. butter” trade-off in resource allocation [11]
4. Capacity Constraints:
   Existing production capacity and labor constraints may suppress short-term economic effects [7]

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Based on current policy trends, possible economic development scenarios for 2026 are as follows:

Scenario	GDP Growth Contribution	Key Assumptions
Baseline Scenario	+0.2%	Existing policies maintained
Efficient Allocation Scenario	Higher	More efficient allocation of defense spending
Constraint Scenario	Lower	Capacity and labor constraints

1. Defense-Economy Balance:
   A balance needs to be struck between national security needs and economic sustainability
2. Regional Disparities:
   Military deployments have significantly different economic impacts on different states and regions
3. Technological Innovation Conversion:
   Strengthen the conversion and application of defense technologies to civilian sectors

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U.S. domestic military deployments can generate significant short-term economic stimulus effects, including job creation, infrastructure investment, and regional economic growth. However, in the long term, a balance must be struck between defense needs, fiscal sustainability, and public resource allocation.

Regarding the military deployment in Minnesota, while the direct economic scale of 1,500 soldiers is limited, combined with the current trend of substantial expansion of the U.S. overall defense budget, such domestic military operations will become an important observation point in the interaction between defense spending and regional economy.

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[1] Xinhua News Agency - U.S. Officials Say About 1,500 Paratroopers May Be Deployed to Minnesota (http://world.people.com.cn/n1/2026/0119/c1002-40647602.html)

[2] Lianhe Zaobao - U.S. Media: Pentagon May Deploy 1,500 Troops to Minnesota (https://www.zaobao.com.sg/realtime/world/story20260118-8119789)

[3] Holland & Knight - FY 2026 National Defense Authorization Act (https://www.hklaw.com/en/insights/publications/2025/12/fy-2026-national-defense-authorization-act)

[4] Morgan Lewis - Defense Funding and Policies Set for Next Year (https://www.morganlewis.com/pubs/2025/12/defense-funding-and-policies-set-for-next-year-as-fy2026-ndaa-becomes-law)

[5] Xinhua News Network - $1 Trillion: Where Will the “Highest Defense Spending in U.S. History” Go? (http://www.news.cn/milpro/20250410/16bfd49ec990476598575cbdc1cf032a/c.html)

[6] Orient Securities Institute - FY25 U.S. Fiscal Policy: A Baseline Scenario (https://pdf.dfcfw.com/pdf/H301_AP202502031642754249_1.pdf)

[7] TD Economics - The Economic & Fiscal Impacts of U.S. Defense Spending (https://economics.td.com/us-defense-spending-impacts)

[8] Louisiana Economic Development - Military Spending in Louisiana Up 77% (https://www.opportunitylouisiana.gov/news/military-spending-in-louisiana-up-77-generating-17-billion-economic-impact-statewide)

[9] California State Library - California Statewide National Security Economic Impacts, 2025 Update (https://www.library.ca.gov/wp-content/uploads/crb-reports/2025_California_Statewide_MEIS.pdf)

[10] Nature - Time-varying effects of U.S. military expenditure on economic growth (https://www.nature.com/articles/s41599-025-05770-3)

[11] Investopedia - Impact of Military Spending on Economic Growth (https://www.investopedia.com/articles/investing/072115/how-military-spending-affects-economy.asp)

[12] European Commission - The economic impact of higher defence spending (https://economy-finance.ec.europa.eu/economic-forecast-and-surveys/economic-forecasts/spring-2025-economic-forecast-moderate-growth-amid-global-economic-uncertainty/economic-impact-higher-defence-spending_en)