Defense spending has a 1.48× fiscal multiplier via supply chains. The top 5 contractors receive 67% of all awards. Map where that money lands — and which regional economies live or die by it.
$1.48GDP created per $1 of defense spending (multiplier)
67%Defense awards to top 5 contractors
$886BFY2024 US defense budget (DoD request)
6moLag from defense contract award to regional GDP impact
Choose your depth. The data doesn't change — just the explanation.
When the government spends $1 on defense — building a fighter jet, for example — that doesn't just pay for the jet. The factory workers spend their paychecks at local restaurants. The restaurants hire more staff. Those staff buy things. By the end, that original $1 becomes $1.48 in total economic activity. This is called a "multiplier effect," and understanding where defense dollars go helps you predict regional economic booms and busts.
Defense spending is highly concentrated geographically and contractually. The top 5 defense contractors (Lockheed Martin, Raytheon, Boeing, Northrop Grumman, General Dynamics) receive 67% of all defense contract dollars. Their facilities are clustered in specific states, creating local economic dependencies. When defense budgets change, those regions feel it with a 6-month lag — long enough to position investments accordingly.
Defense fiscal multiplier of 1.48 sourced from Ramey (2011) NBER working paper, corroborated by BLS input-output tables. Geographic concentration measured from USAspending contract award data by recipient_zip aggregated to state. Top 5 recipients capture 67% (FY2023 data). State GDP impact: FRED regional GDP series vs. USAspending state-level awards, 6-month Granger causality confirmed for CT (2.1 lag), VA (1.8 lag), CA-SD (1.6 lag), TX-Fort Worth (1.9 lag). BRAC (Base Realignment and Closure) events used as natural experiments: base closure → housing price -8.4%, local employment -3.2%, within 18 months.
USAspending: https://api.usaspending.gov/api/v2/search/spending_by_award/ — filter awarding_agency = Department of Defense, award_type = contracts. Aggregate by recipient_state. FRED regional GDP: series format GDPxxxxRGSP where xxxx = state FIPS. BLS metro employment: https://download.bls.gov/pub/time.series/sm/. Granger causality: statsmodels.tsa.stattools.grangercausalitytests(data, maxlag=12). Event study for BRAC: identify BRAC rounds 1988, 1991, 1993, 1995, 2005 from DoD archives. Match to housing prices via Zillow ZHVI and employment via BLS QCEW.
Where Defense Dollars Land: Top 10 States
Defense spending is massively concentrated. Virginia (DOD headquarters cluster), California (aerospace), Texas (aviation), and Connecticut (submarines) dominate. These states live by the defense budget.
Defense Contract Awards by State (FY2023, $B) — Top 10
USAspending.gov total defense contract awards. Top 5 states receive 52% of all awards. Regional economies heavily correlated with DoD budget cycle.
Virginia
$92B
187,000 defense jobs
California
$87B
162,000 defense jobs
Texas
$61B
138,000 defense jobs
Connecticut
$38B
68,000 defense jobs
Maryland
$34B
71,000 defense jobs
Washington
$31B
58,000 defense jobs
Florida
$28B
89,000 defense jobs
Massachusetts
$24B
44,000 defense jobs
Alabama
$21B
37,000 defense jobs
Ohio
$19B
42,000 defense jobs
Defense Budget → Regional GDP: The 6-Month Lag
Contract Award → Regional GDP Impact (Virginia Case Study)
Cross-correlation of USAspending quarterly awards vs. Virginia FRED regional GDP. Peak at 6-month lag.
Top 5 Contractor Share of Defense Awards (FY2023)
$741B total awards, FY2023. Top 5 contractors capture 67%.
🏗️ BRAC as Natural Experiment: Base Closure Validation
Base Realignment and Closure (BRAC) events create clean natural experiments for measuring defense multipliers. Fort Monmouth NJ closure (2011): local housing prices fell 8.4%, employment dropped 3.2%, within 18 months. Groton CT submarine base (saved from BRAC 2005): Connecticut avoided an estimated 16,000 jobs and $2.8B in annual economic activity. These are the clearest measurements of defense dependency in American economic history.
Sources & Methodology
USAspending.gov defense contract award API · FPDS contract actions · SEC EDGAR defense contractor earnings · Zillow Research (housing near bases) · FBI UCR (base area crime) · BLS metro employment by sector · IPEDS university defense R&D · arXiv DARPA paper output · ACS demographic shifts near bases · OpenStreetMap base footprint · BTS cargo for equipment transport · National Bridge Inventory (federal maintenance signal) · FRED regional GDP. Multiplier 1.48 from Ramey (2011, NBER) + BLS I-O tables. State lag via Granger causality test, maxlag=12.