SUMMARY: The U.S. spent more than one-third of its entire economic output on World War II, and no conflict afterward really compares. However, we’re now spending more on defense, in inflation-adjusted dollars, than we did in the most expensive year of the Cold War. Sessions is right that our current defense spending is about 4 percent of the gross domestic product, but the post-World-War-II average is about 6 percent, not 8 percent as Sessions implies.
ANALYSIS: “There are three ways to look at total defense spending,” said Todd Harrison, who studies defense budgets for a living. “The picture you get depends on which method you choose, and most people pick the method that supports their views."
Harrison is a senior analyst for the Center for Strategic and Budget Assessments, a Washington nonprofit think tank that is financially supported by Defense Department grants, foundation grants and contributions from defense contractors.
The most obvious way to measure defense spending, Harrison said, is by looking at plain dollar amounts –- adjusted for inflation, of course.
On that account, Harrison said, defense spending is as high as it has ever been since World War II –- and potentially much higher.
Harrison’s organization has produced inflation-adjusted numbers on defense spending going all the way back to 1946. In real dollar terms, he said, the Pentagon budget was never higher than in 1985, when the Reagan administration sought and got $531 billion for the DOD.
In the budget deal reached in April, Congress gave the Pentagon $530 billion – just $1 billion short of the late Cold War high.
But there’s more. The $530 billion figure is just the “base” defense budget. In other words, it covers the cost of maintaining the military: paying salaries, fueling jets, fixing tanks and researching new weapons. Since their beginning years, America’s wars in Afghanistan and Iraq have been budgeted separately in a “war funding” budget.
Critics of both wars have had a field day with what they call “off the books” accounting of war costs. Stephen Miller, a Senate staffer for the office which supplied Sessions with his numbers, said it makes sense to count the two items separately, because the defense budget represents things that can be planned in advance, while the war budget is often shaped by world events.
“War funding is projected to go down over the next 10 years, but it’s affected by events that are beyond our control,” said Miller, who works for the Senate Budget Committee, where Sessions is the ranking member.
Hamilton, the analyst, said past wars were funded by a “budget supplement” in their initial years, then folded into the broader defense budget in later years. That never happened for Iraq and Afghanistan, which together are expected to cost about $160 billion in fiscal 2011, pushing the total defense cost up to $690 billion, well above the Cold War high. (Some analysts include the cost of defense-related nuclear energy programs, pushing the total slightly higher.)
To put those numbers in local perspective, Anniston Army Depot, the area’s largest employer, had a budget of $1.26 billion in 2008, its peak year to date. The Pentagon spent $15.6 billion destroying Anniston’s chemical weapons stockpile, a process that began with construction more than a decade ago and ended last month.
Still, Harrison said, that’s just one way of looking at defense spending. Another is to do what Sessions did, counting the defense budget as a percentage of the gross national product. Defense analysts sometimes use that number when looking at other countries, because a high percentage might mean a country is preparing for conflict. Closer to home, budget analysts use it as a measure of sustainability. When the defense budget is a small slice of the nation’s overall wealth, America is more likely to be able to afford the cost in the lost run.
America’s spending –- including the war budget –- was 4.2 percent of GDP in 2011, Harrison said. Sessions got that right.
He’s also right that this is nowhere in the ballpark of the country’s historic high. In 1943, 1944 and 1945, defense spending made up 37 percent of GDP. No war effort since then has come close to consuming as large a share of the nation’s wealth.
And the current number is down significantly from Cold War highs. Cold War spending as a percent of GDP peaked in 1953, when America spent 15 percent of its economic output on the Korean War and the global stalemate with the Soviet Union. At the height of Vietnam, the nation spent about 10 percent of its GDP on the military. At the peak of the Reagan-era buildup, only about 6 percent of GDP went into defense.
But those peaks are offset by troughs, first in the 1970s and then more deeply in the 1990s, when the Cold War drawdown brought spending down to only 3 percent of GDP. (Fort MClellan, once Anniston’s economic lifeblood, was shut down in 1999, the same time spending first hit the 3 percent mark.)
All told, Harrison said, defense spending consumed 6.3 percent of GDP in the average year since World War II. (Fiscal 1946 began in July 1945, a month before the bomb was dropped on Hiroshima. If you count 1946 as a post-war year, the average bumps up to 6.4 percent.)
So current spending isn’t “half of the post-WWII average” as Sessions contends, but spending as a percentage of GDP is lower than at most points during the Cold War.
How did the percentage get so low when spending grew in real-dollar terms? Harrison said that over the decades, America’s economic growth outstripped the growth in the defense budget.
Miller, the Senate aide, said percentage of GDP is the best figure to use, because of trends such as economic growth and inflation. Harrison agrees that the current numbers indicate that our current level of spending is “more sustainable” than during the Cold War.
The third way to judge defense spending, Harrison said, is as a percentage of the federal budget. In many ways, that gets more directly to Sessions’ point. At the Values Voter summit, Sessions made his point about the defense budget as a rebuttal to critics who say defense is an obvious area for budget cuts as the nation tries to get spending under control.
Defense makes up about 19 percent of the current budget, and, according to Harrison, that’s just below Cold War levels, when it averaged 21 percent of the total budget. According to Congressional Budget Office figures, Medicaid and Social Security each take up about the same slice of the budget pie. Sessions claims those slices are growing.
“The truth is that defense makes up less than 20 percent of our total budget,” Sessions said at the Value Voters summit. “In 2030, while our defenses will still be under 5 percent of GDP, according to estimates, the entitlement spendings would be 15 percent of our entire economy.”
Realistically, Sessions can’t predict stability in the defense budget unless he has a foreign policy crystal ball. But his numbers on “entitlement” spending are sound. According to CBO projections, Medicare combined with Social Security and a few related programs will cost 15 percent of GDP by 2030. The CBO cites the rising cost of health care and the aging population as reasons for the growth.
Incidentally, Harrison says similar factors are increasing the defense budget as well. In a June report on defense spending, he wrote that health care costs for military personnel and dependents are rising higher than inflation, and the number of retirees using the TRICARE military health care system is growing.
The United States accounts for 43 percent of the world’s total military spending, according to the Stockholm International Peace Research Institute, a Swedish nonprofit that monitors global military expenditures.
Our nearest competitor, in pure dollar terms, is China. While China and Russia are both said to downplay their military budget numbers, SIPRI estimates Chinese military spending at about one-sixth the spending in the United States. Globally, countries spend an average of about 2.6 percent of GDP on military forces, and China is close to that average. Russia and the United States both exceed the average, at around 4 percent. The highest percent-of-GDP spending is in the Middle East, where many countries spend more than one tenth of their economic output on military forces.