March 1, 2007  

The GDP argument

Should defense spending be tied to U.S. economic growth?

The $716.5 billion defense budget he sent to Congress last month “is staggering,” Defense Secretary Robert Gates conceded to the House Armed Services Committee.

“There has been, understandably, sticker shock,” he acknowledged to the Senate Armed Services Committee.


The 2008 budget would push defense spending higher than it has been since World War II, budget analysts say, exceeding spending at the height of the Vietnam and Korean wars.

The nonwar portion of the 2008 defense budget, $481.4 billion, is 11.3 percent more than the U.S. military is spending in 2007. On top of that, President Bush is asking for $141.7 billion to fight the wars in Iraq and Afghanistan during 2008 and $93.4 billion to fight for the rest of 2007.

Sounds expensive, but according to Gates, it’s really not. The 2008 defense budget equals about 4.4 percent of the nation’s gross domestic product, Gates told the two congressional committees. “That’s actually a smaller percentage of GDP than when I left government 14 years ago following the end of the Cold War, and significantly smaller” than during the Vietnam and Korean wars, he said. In fact, since 1993, the U.S. has been spending “a smaller relative share of our national wealth” on defense even as the world has grown “more complicated and arguably more dangerous,” Gates said.

As defense spending has ballooned from $304 billion in 2000 to more than twice that today, senior military officials have taken to reciting the “defense spending as a percentage of GDP” argument for why defense spending should be higher still.

Gen. Michael “Buzz” Moseley, the Air Force chief, complained last fall of struggling with “budgets that are at historically low percentages of GDP” even as Congress approved a record-breaking $121.7 billion Air Force budget for 2007. In December, Gen. Peter Schoomaker, the Army chief, complained that 3.8 percent was “historically low during wartime,” and called for spending up to 6 percent of GDP on defense. That would be about $900 billion annually. Schoomaker cited past defense spending: During World War II, it was 38 percent of GDP; during Korea, 14 percent; Vietnam, 9.5 percent; during the Reagan buildup, 6.2 percent.

The GDP argument exasperates defense budget expert Christopher Hellman. To say that defense spending as a percent of GDP is historically low “is accurate, but it is also misleading,” said Hellman, who heads the Project on Military Spending Oversight. It is equally accurate to say that the proposed 2008 defense budget, minus war funds, “is more than 25 percent above the Cold War average — and this for a military one-third smaller than it was in 1990,” he said.

The Pentagon is hardly starving. “Since Sept. 11, 2001, annual defense spending — not including funding for Iraq and Afghanistan — has grown by $120 million, an increase of 34 percent,” Hellman said. The only reason the percentage of GDP is smaller is because the U.S. economy has grown even faster — 44 percent over the same period, he said.

To cite the “historically low percentage of GDP” argument as reason to further increase defense spending “is a specious argument, Hellman said. “It’s like your landlord saying that since you got a pay raise, your rent should increase.” The GDP number describes the value of the U.S. economy. It tells nothing about how much the military needs to spend, he said.

“What happens if GDP decreases?” as it might during a major recession. “Would the military then support a parallel reduction in its budget? I think not,” Hellman said.

The defense budget’s percentage of GDP best serves as a measure of the burden military spending is placing on the U.S. economy, said Baker Spring, a defense analyst at the conservative Heritage Foundation. At 4.4 percent — the proposed level of defense spending when war costs are included — defense spending can hardly be said to be an economic burden, he said. Social Security, Medicare and Medicaid consume 8.7 percent of GDP, nearly twice defense’s share, he said.

The U.S. economy could easily handle spending 5 percent of GDP on defense, “but I’m not saying we need that much,” Spring said. “Heritage is the most pro-defense think tank in town, and our benchmark is 4 percent” in peacetime, he said. It is the portion of GDP devoted to entitlements, not defense, that is a matter of concern, Spring said. With baby boomers nearing retirement age, the U.S. will be “trying to swim upstream against a demographic tidal wave” if it attempts to provide the full Social Security and medical benefits long promised. “It will bankrupt this country,” he said.

But if Congress tries to cut Social Security and Medicare benefits, the handful of generals and admirals complaining about their paltry share of the GDP will be overpowered by the cries of 79 million baby boomers. AFJ