Since this is obviously a point of contention in the current fiscal cliff craziness. Barney Frank wrote this article earlier this year which I'm obviously sympathetic to. I particularly enjoy this line: In a book on modern warfare I'm currently reading, the author (Jim Dunnigan, for you wargame nerds out there) makes the claim that cutting defense spending may or may not have short term negative effects on the economy, but is good for the economy in the medium to long term. He argues that defense spending doesn't really produce things of economic value, that the high-tech nature of most defense work creates a "brain drain" that could be a significant opportunity cost for civilian business, and that most job losses from cutbacks are easily replaced. However, he doesn't cite anything, so I have no idea where he's getting the data. I quite like his line of reasoning, but was hoping someone here might have some more substantial support to throw at it.