Defense Spending Wizardry

on December 20, 2011 at 9:35 AM

The failure of the Congressional Super Committee last month initiated a new phase in the defense spending debate.

Barring intervention from the Congress and President, the Committee’s failure results in an average reduction of $55 billion per year over nine years, beginning in January 2013, from defense spending that now exceeds $700 billion annually. Both sides of the debate have begun employing wizardry to use a variety of numbers to make their respective arguments on the right level of spending.

In the aftermath of the 2001 terrorist attacks there was little debate surrounding defense spending. Congress and the President delivered what was necessary to meet the threats. In the wake of the rising national debt and a struggling domestic economy, the classic question in defense spending has reemerged of “How much is enough?” Before debating the size of the military and the priority threats, however, the more basic issue is “How much are we spending right now?”

Wizardry comes in how the arguments for and against more defense spending use the same numbers.”

The Congressional Budget Office (CBO) provides an appropriate baseline for defense spending in its analysis of the recently completed fiscal year that ended Sept. 30.

Defense Department spending totaled $712 billion in fiscal year (FY) 2011, including:

  • $159 billion for the operations in Iraq, Afghanistan, and other overseas contingencies;
  • $154 billion supports pay and benefits for the military.
  • $308 billion for operations and maintenance of the armed forces;
  • $129 billion for weapons procurement;
  • $76 billion for research and development
  • $21 billion for other DoD spending ; and
  • $23 billion for non-DoD security spending.

The categories of defense spending matter because reductions in different places have varying political and national security consequences.

Percentages are a common approach the numbers wizards use to make their respective arguments on defense spending. Two arguments surround comparing defense spending to the overall federal budget and the U.S. Gross Domestic Product (GDP).

The percentage of the federal budget spent on defense can be interpreted as a statement of national priorities. Total spending by the U.S. Government was $3.6 trillion of mandatory and discretionary spending in FY 2011.

Mandatory was $2.2 trillion or 61% of spending and includes Social Security, Medicare, Medicaid, and other assistance programs authorized by law. Discretionary contained both defense and non-defense spending on direct federal programs, totaling $1.4 trillion or 39% of overall spending.

Wizardry comes in how the arguments for and against more defense spending use the same numbers.

The argument for higher defense spending is that it only accounts for 20% of all federal spending ($712 billion of $3.6 trillion). Most official forecasts suggest defense will decline as a percentage of spending because of spending caps, possible sequestration, and growth in mandatory spending. The latter of which is largely exempted from caps or sequestration at this time.

Those subscribing to this argument contend that, at a moment in history when the world teems with national security threats, now is not the time to decrease an already modest percentage of revenue dedicated to defense.

Others argue that defense spending is too high when compared to discretionary spending. Defense spending is over 50% of all discretionary spending ($712 billion of $1.4 trillion). According to this argument, defense spending crowds out the discretionary non-defense spending when the economy requires public investment in schools, infrastructure, and science.

Another broad area of argument centers on the percentage of defense spending compared to the U.S. Gross Domestic Product (GDP). The logic to this argument is the size of the economy, not the amount of federal spending available, should determine what the nation can afford for defense.

As a frame of reference, the Cold War average for defense spending was over 6% of GDP. The current percentage is 4.7% ($712 billion divided into a $15 trillion GDP).

Proponents for a robust defense budget assert non-DOD and war spending should not be categorized as defense spending. Using this formulation, the percentage of the “base” defense spending to GDP is only 3.5% ($530 billion of $15 trillion).

What is unclear about setting a percentage of GDP as a defense spending target is whether it is based on a concrete assessment of national security requirements. Additionally, historical comparisons of GDP percentages are complicated by the fact that GDP has risen dramatically from $6 trillion in 1990 to $15 trillion today.

The point to introducing the different arguments is that the same set of numbers can tell different stories depending on how they are presented. The arguments each have their merits; they also have their limitations.

Once the basic facts are agreed upon in terms of how much the United States is spending on defense, the debate over how much is enough becomes very high stakes. All indications are that defense spending will be reduced in the years ahead. The hardest question facing elected officials and the public is which threats the nation is willing to accept some risk given fiscal realities.

James Windle is a federal employee who has worked for executive branch agencies, the Executive Office of the President, and Congress. The views and opinions of the writer are his solely and independent from the United States Government.