Soft power complements hard power, and, in cases, may substitute for it. Traditionally, the economy entered into the national security debate through four issues: the defense industrial base, base closures and program cuts, international economic sanctions, and export controls. This broad review of economics and national security illustrates how disparate parts of the U.S. economy affect the security of the nation and that security is something achieved not only by military means but by the whole of the American economy and how it performs. In national security, the economy is both an enabler and a constraint. The purpose of this report is to provide an overview of the economic contributors to national security as well as to furnish links to further resources. The first is the nature of the external threat to physical security—the rise of terrorism and militant Islam. Congress plays a major role in each element of national security. Not only does Congress provide funding for these elements of national security, but it provides oversight, defines the scope of U.S. action, and provides a crucible in which U.S. policies are debated and often determined. Those related to the economy were:
in order to build an America that is stronger, more secure, and able to overcome challenges while appealing to aspirations of people around the world, the United States must foster economic growth, reduce the federal budget deficit, educate our people, develop clean energy alternatives, pursue science and innovation, and build capabilities and alliances to pursue interests shared with other countries and peoples; the United States seeks an international order and cooperation with other nations that will counter violent extremism and insurgency, stop the spread of nuclear weapons, combat climate change, sustain global growth, and help countries feed themselves; and the United States will continue to advocate for and advance human rights, economic development, and democracy as a bulwark against aggression and injustice. The economy always was there, both to fund the military and underpin the provision of economic security for households. Policies for economic growth and issues such as unemployment were viewed as domestic problems largely separate from considerations of national security. As the world begins the second decade of the twenty-first century, the United States still has a preeminent military, large economy, strong alliances, and democratic values. However, the economy has come more into play because the country has long been accustomed to pursuing a "rich man's" approach to national security strategy. The United States could field an overwhelming fighting force and combine it with economic power and leadership in global affairs to bring to bear far greater resources than any other country against any threat to the nation's security. National security is sought through a combination of hard power, soft power, and economic opportunity. In the short-term, therefore, the financing of the deficit does not appear to be a problem. In addition to providing resources for the defense community needed to provide physical security, the economy, itself, provides the means for Americans to attain economic security. On a global basis, the importance of economic growth to national security was demonstrated in the 2008-2009 global financial crisis. Human Capital

Economic growth is highly dependent on increasing the productivity of workers. It depends greatly on the ability of workers to generate and use knowledge in the production process, which, in turn, depends on the skill and education of workers. Globalization, Trade, Finance, and the G-20

The U.S. economy and national security depends greatly on what happens in countries and economies in the world at large and on the financial impact of trillions of dollars that flow through international foreign exchange markets each day. However, some remain skeptical of China's willingness to eliminate its export-oriented economic policies.
As the world begins the second decade of the twenty-first century, the United States holds what should be a winning hand of a preeminent military, large economy, strong alliances, and democratic values. The nation's security should be secure. Yet the debate over national security seems to be both intensifying and broadening. The problem appears not only in the difficulty of finding a winning strategy in the long war against acts of terrorism but having to face economic constraints that loom large in the public debate. In addition, the global financial crisis and recession have highlighted the trade-off between spending to protect against external threats and spending to provide jobs and income for citizens at home. The United States has long been accustomed to pursuing a "rich man's" approach to national security. The country could field an overwhelming fighting force and combine it with economic power and leadership in global affairs to bring to bear far greater resources than any other country against any threat to the nation's security. The economy has always been there both to provide the funds and materiel for defense and to provide economic security for most households. Policies for economic growth and issues such as unemployment have been viewed as domestic problems largely separate from considerations of national security.
The world, however, has changed. Globalization, the rise of China, the prospect of an unsustainable debt burden, unprecedented federal budget deficits, the success of mixed economies with both state-owned and private businesses, huge imbalances in international trade and capital flows, and high unemployment have brought economics more into play in considerations of national security. Traditionally the economy has entered into the national security debate through its impact on the nation's hard power: the funding of defense, the efficacy of the defense industrial base, and the use of economic sanctions and other instruments as non-kinetic tools of warfare. The long-term efficacy of hard power, however, depends greatly on the ability of a country to provide for it through an ever growing and innovative economy.
National security depends also on soft power, the ability of a country to generate and use its economic power and to project its national values. This, in turn, depends on long-term factors that contribute to economic growth and increase the total resource base available not only for defense but to provide economic security in the form of income and business opportunities for individuals. Economic growth depends on building human capital. It also depends on science, technology, and innovation. In addition, the increased integration of the U.S. economy into global markets means that U.S. security also depends on global economic stability, on a balanced international economy, the ability to coordinate key economic policies with other leading nations, and deterring threats to the international financial system. Soft power also enables the country to project American values through diplomacy, economic assistance, fostering democracy and human rights, and promoting sustainable development abroad. Congress plays a major role in each of these elements of national security.
This analysis illustrates how disparate parts of the U.S. economy affect the security of the nation. Security is achieved not only by military means but by the whole of the American economy. In national security, the economy is both the enabler and the constraint. This report briefly addresses each of the above issues and provides a context and some possible alternatives to current policy. The purpose of this report is not to provide an exhaustive analysis but to survey the landscape, show how each issue relates to national security, examine possible Congressional actions, and refer the reader to relevant CRS products and analysts.