Shortly after the terrorist attacks on September 11, 2001, President George W. Bush was plagued with a new priority which includes a more effective fiscal plan for defense spending. An increase in government spending would be necessary for airport security, homeland security, and defense to wage war against terrorism. The increased spending on airport security, homeland security, and defense is not an intentional fiscal policy (i.e., output is low therefore you increase spending), but it will have effects like an intentionally expansionary fiscal policy (output is fine, but there is an external threat, so we increase spending, and output goes up more than it would have otherwise). (see "A War Economy", Opinion Journal from the Wall Street Journal)
In order to increase spending in defense, especially in military forces, the economy will need to be strengthened for war efforts and to maintain public support. A boost in the economy could in fact come from a tax reduction or an acceleration of the current tax cut. (see Du Pont, P., "The Kaleidoscope Turns" Opinion Journal from the Wall Street Journal) Such an incentive will assist individuals in investing and to resume risk taking and ultimately allow President Bush to increase military forces to fight against terrorism. The war on terrorism is far less costly than other recent conflicts. In 2000, the nation was spending about 3% of GDP on the military; Bush has planned for the 2003 fiscal policy, spending of 3.5% on military. The spending on defense will be at about one-half of the spending when Reagan was president. In 1981, when President Reagan took to the office, the nation was spending 4.9% of GDP on the Cold War; within five years President Reagan increased the spending to 6.2%. (see Gleckman, H., "Big Spending Wrapped in a Flag," Business Week. Issue 3770, p44.) Bush has $650 billion planned, in the budget for 2003, for defense and homeland security spending. President Bush has the ability to strengthen the economy and build defense for the protection of homeland and military forces. It is important to note, that since the economy flourished during the 1980's because of Reagan's buildup, it will most likely experience growth over the next several years, but not to the same extent.