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The Downside Of The Peace Dividend


Economic Trends

THE DOWNSIDE OF THE PEACE DIVIDEND

While Congress weighs new cuts in defense outlays, economist Carol Stone of Nomura Securities International notes that they are already plunging--by $6.1 billion in last year's third quarter and $11.6 billion in the fourth. And these cuts, plus others in the pipeline, she warns, "will offset fiscal stimulus in other sectors." Using an econometric model developed by Laurence Meyer & Associates of St. Louis, Stone estimates that just the drops in defense spending in the last half of 1991 will subtract about half a percentage point from gross domestic product in the next six months as their multiplier effects percolate through the economy.GENE KORETZ


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