Originally Posted by
Fluglehrer
I'd be careful about the cause/effect relationship with this. Military spending as a portion of GDP has actually declined since Vietnam, even with the Reagan build-up and the GWOT:
File:US defense spending by GDP percentage 1910 to 2007.png - Wikimedia Commons
The break-up of the Eastern Bloc/Iron Curtain and the new markets that blossomed there and in the USSR former client states, along with the ramp-up of trade with China, along with the "gridlock" of a GOP Congress/Senate and a Dem President all contributed to the 90's boom. To name any single stream as having the primary influence is difficult to substantiate.
I'm not saying that the cold-war drawdown was the cause of the 90's boom, it's probably too complicated to even know for certain how much of an impact it had. I used the word "subsequent", not "resultant", for a reason. But that drawdown, after some initial adjustment pain, didn't hurt the boom either. That's the point I'm making...there are valid reasons to assess and adjust defense spending, but fear of short-term economic pain in a few sectors or locales is not a good one.
Also your graph is very hard to reference since there are two variables, and a change in either one moves the plot...can't tell (other than historical context) whether any given change is in defense spending or GDP, or both.