David R. Henderson

Budgetary Implications of Defense: Bleg

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On the KQED interview I did on the federal budget, I made the following statement:

I'm actually an advocate of having the defense budget be the defense budget, not the offense budget. And most of what the government spends now is either directly for wars against other countries that have never attacked us or to prepare for wars against other countries that are unlikely to attack us. And so I would like to see the U.S. government pull out of all the bases in the world, and I think we could cut the defense budget, which is really an offense budget, by approximately $500 billion a year.

I made this $500 billion estimate based on the idea that over half of the approximately $800 billion spent on defense ($700 billion for DoD plus a lot of Department of Energy spending plus a lot of of Veterans Affairs plus much of CIA spending) is for offense. See my recent review of Chris Preble's book for some numbers from 2007.

Later, I wanted to find studies that would back up or refute my estimate and I can't find any. Years ago Earl Ravenal of Cato did such a study but I haven't seen one in the last decade or so. It seems that that would be very valuable and that a think tank such as the Cato Institute or the Independent Institute would have done one. But I can't find such a study. Does anyone know of one? Links would be valuable too.


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CATEGORIES: Fiscal Policy



COMMENTS (15 to date)
Elvin writes:

I don't have problems with cutting the defense budget. There are several programs that could be severed or curtailed that would not change our strategic abilities very much.

Do you believe that the US should have no ability to overthrow regimes that are clearly antithetical to freedom and liberty? Was it OK to invade Granada if it were on the road to being another Cuba? Do you believe that our interest in liberty stops at the water's edge? Given the difference between North and South Korea, I find it hard to justify letting the Chinese and North Koreans impose their brand of society over tens of millions of people.

I think that the US military has been one of the greatest institutions in promoting freedom and liberty in the world.

If I were huddled and oppressed in some dark hole in the third world, the best sound I could imagine is a platoon of Marines rolling through my village.

Admittedly, it's a cost-benefit analysis and I don't have a problem with people who argue that Iraq and Serbia were not necessary. I just wouldn't take offense off the table. A credible threat can be a very important card to play in promoting freedom.

David C writes:

I had thought defense spending to be just under $750 billion, but it probably depends on the way it's calculated. I think a good rule of thumb would be reducing US military spending to approximately average based on GDP relative to other countries. The US controls a little over 20% of the world's GDP, and a little under 50% of the world's military. Depending on how the numbers work out, I'm guessing the exact number would be cutting between 65 and 70% of the military's budget, or $520 to 560 billion using the $800 billion dollar figure.

RE: Elvin
I would distinguish between situations where we invaded a country to overthrow an existing ruler like Iraq, situations where we took sides in a civil war like Korea or Vietnam, and situations where we defended a country from a foreign threat such as Kuwait. The first never works. The second rarely works. The third is usually reasonable. Since World War II, almost all of the wars the US has been involved in have been of the first or the second type.

John V writes:

Elvin,

That's an excellent exposition of why I am a libertarian and NOT anything else...like a Republican or Modern Conservative or Wilsonian or whatever title is seduced by such well-intended and wrong-headed thinking. Just libertarian, thank you.

I totally disagree with your justification of our present military. Our interest in liberty may stop at the water's edge...but neither does Hayek's Fatal Conceit that I'm sure you hypocritically support on the domestic front. And the same rationale that makes grimace and turn my back to domestic adventures of social engineering and silly, half-baked ideas to improve society through government fiat is the same rationale that makes me likewise to such grand and naive ideas abroad.

I find it astounding that so many liberals and conservatives are so able to sincerely parrot common-sense libertarian sounding lingo on their chosen front...be it domestic or abroad, yet then do a complete 180 on the other front while being completely unable to see that their arguments on front are totally contradicted by their arguments on the other.

Will the choice of Ham and Peanut Butter or Jelly and Cheese ever end??

Tom writes:

Table 3.2, available at this page, shows 2009 defense-related outlays (050) at $661 billion, including atomic energy (053, $17.552Bn). If you want, add in $22 billion in development and humanitarian assistance (151), $6.25Bn in intl security assistance (152), and $95.42Bn in veterans benefits and services (700). Call it about a cumulative $785 billion.

The same table also contains historical data, so you can see the same outlays in 2001 totaled less than half that, about $370 billion. I'm pretty sure these are nominal, not constant, dollars, so that explains some of the change, and some of the veterans benefits cost increase (about $50Bn of the increase) is explained by aging of the veteran population, but that's still $75Bn in procurement increase, $75Bn in military personnel costs increase, and almost $150Bn in operation and maintenance cost increase.

Re your linked-to review, you probably should not be using the 1991 Gulf War as an example of the cost of war not being worth the benefit, from a dollar perspective. That ($46Bn) entry in 1991 under Other in 050 is cost reimbursement from other countries. The net monetary cost of that war was possibly less than the potential GDP hit in 1991 alone.

Bob Murphy writes:

You could try to calculate the amount the colonists spent on defense when they threw off domination from the world's greatest military force. I would imagine the corresponding figure today, in order to avoid being overtaken by ...?, would be a lot less than $500 billion annually.

In fact I think if the federal government spent $0 on defense, the continental US would be unconquerable (which is not the same as undestroyable). As Tojo said, you can't invade the US mainland because there would be a rifle behind every blade of grass (at least if they repealed gun control laws).

Tom Lee writes:

The savings David talks about could make an enormous positive difference to the US economy, perhaps saving our country from a disastrous default on our national debt or hyper-inflation. But remember that the most profound toll of war falls on the poor, not on the residents of rich countries like our own.

Recall the words of President Dwight Eisenhower who (sounding like the most radical libertarian) said:

Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.

This world in arms in not spending money alone.

It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.

The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities.

It is two electric power plants, each serving a town of 60,000 population.

It is two fine, fully equipped hospitals.

It is some 50 miles of concrete highway.

We pay for a single fighter with a half million bushels of wheat.

We pay for a single destroyer with new homes that could have housed more than 8,000 people.

This, I repeat, is the best way of life to be found on the road the world has been taking.

This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.

david writes:

"A rifle behind every blade of grass"* only works when your opponent isn't willing to casually slaughter civilians, as we are seeing in Iraq and Afghanistan. Or feels obliged to form a new government by consent for some reason, instead of just destroying whatever you set up.

Even then, all it can do is annoy an enemy and hopefully weaken its political resolve at home.

The meaningfulness of the difference between "unconquerable" and "undestroyable" turns out to hinge on your future opponent's attitude towards American civilians. Here's a strategy: I, Future Warlord, invade the Libertarian States of America and simply bomb any infrastructure that isn't in the tiny geographical region I bother to defend. Then I sit and wait for civilians to come to me unarmed instead of me hunting for them.

* the quote is, by the way, not due to Hideki Tōjō nor Isoroku Yamamoto, despite the common misattributions.

Carl The EconGuy writes:

Defense is not like a football team with half offense, half defense. To make the point, what about the ICBMs during the Cold War? Defense, offense? You could have a long philosophical debate about that. The Bush Doctrine, like it or not, was that the best defense is a preemptive offense. In fact, you can easily make the case that all military power is defensive, in a broad sense.

Surely there are ways of cutting the defense budget, but the defense/offense distinction is not the way to think about it. The DoD makes a big show out of threat analysis and strategic reviews. But that's not had any serious impact on the defense budget, at least not since the wall came down.

The real problem in strategic analysis is just what I began with: can't make any meaningful distinction between offense and defense, esp. over longer periods into the future when the cdapabilities of adversaries is uncertain.

In reality, defense spending is budget constrained, which means that all the stuff that budgets are made of is in the DoD as everywhere in the budget, including rational planning and fat and stupidity and pork, pork, pork plus special interests. Defense is one of the most politicized areas of the federal budget.

From a rational planning perspective, my biggest problem with our national security policy is how we continue to subsidize the Europeans. NATO is outdated. We should not protect Europe from islamic aggression, they'll need to do that for themselves -- and a little European offense would go a long way to reduce the need for future defense in that area. We're living with a Cold War hangover that allows the Europeans to free-load on our military capabilities. In view of how little they have helped us with terrorism, that's a good place to cut. That said, we do need a few good bases in Europe to get where we need to go when we need to go. Right now, that's mostly Germany. But participation in NATO is a very high price to pay for Ramstein.

David R. Henderson writes:

@Carl The EconGuy:
"The Bush Doctrine, like it or not, was that the best defense is a preemptive offense."
Actually, that wasn't the Bush Doctrine. Many people, including me, have long accepted that you might need pre-emption. Bush's big step was the idea of preventive war.
"In fact, you can easily make the case that all military power is defensive, in a broad sense."
Easily? Really? OK, and you're going to make the case?

Jim writes:

If I were huddled and oppressed in some dark hole in the third world, the best sound I could imagine is a platoon of Marines rolling through my village.

Nice. Spoken like someone who has clearly never lived a life huddled and oppressed in some dark hole in the third world, where the Marines are probably there to prop up the local strong man who's oppressing you.

Tom writes:

Following up on Carl's comments, there's what has been characterized as the security dilemma. There's a Wiki article on the subject, but if you're interested in learning more, I believe the Jervis article listed at n.1 (World Politics Review Vol. 30 No. 2, p.167-74) should give you a decent brief overview. The basic problem is that virtually every weapon and weapon system could be used in either an offensive or defensive role, aside from perhaps land mines.

Jeremy, Alabama writes:

I'd describe myself as a chickenhawk, but the thought of a greatly reduced defense budget and disengagement from a bunch of places that don't want us there is very tempting.

However I tend to agree with foreign policy analysts who say that it is better the devil we know. For instance, if we removed our nuclear umbrella from Germany, they would be a nuclear power within 3 months, with potential consequences ranging from nuclear proliferation to the breakup of the EU and a militarized Europe.

It is much harder to get back to places than to stay there. Even the UK realizes this, and so they have kept their "empire of rocks and penguins" as handy forward bases all over the globe.

My feeling is that Disengagement cannot be pursued stand-alone, but only as part of a comprehensive domestic/international policy review. For instance, the most reliable energy is domestic energy, so we'd have to start drilling and building nuke power stations. I also feel that we would need a tax policy that would encourage investment in the US, rather than us having to bully our allies, like we have done with the Swiss.

A disengaged posture would likely mean a "punishment"-style deterrence instead of engagement-style. It would be more like we did in Kosovo, but potentially on a vast scale. As bad as they currently are, Iraq and Afghanistan would probably be worse after a punishment-style war than the course we adopted.

I really like the sound of massive defense savings, and getting out of other people's business. It might work as part of a comprehensive return-to-Jeffersonian policy shift. But as a Kucinich Ministry Of Peace type thing it is likely to do more harm than good.

Brian Clenidnen writes:

The problem I see with the general idea that Military spending needs to decrease and be defensive only is this. Military economics ( do not know if it is a recognized field as the military practices it) is such a unique off-shoot/merger of Economics, Finance, Political Science, History, and Military Science that I do not even know how to frame a simple argument at the dangers of this position. The simplest argument I can think of is that historically the best defense is a good offensive. This is a commonly agreed to consonance in military science. Not sure the economic opportunity cost one would need to way against this idea, because it really is un-measurable.

The closest analogy I can think of in financial terms is catastrophic insurance if the insurance could actually reduce the risk of catastrophic events and more common risk such as unstable governments. The military reduce insurance risk primarily through offensive strategies so as to force one to fight overseas before domestically and improves stability(general speaking improves productivity). My thinking is systematic risk and unsystematic risk in this analogy becomes much more blurred.

I think the best starting point to examining this position on the proper size of military spending would be to examine military spending verses the economic impact each world war had. These are also important cases to examine because one the use of an offensive military force early in WWII would of reduced the overall economic impact. Secondly, the U.S. military domination reduced the likelihood of a large scale conflict repeating itself.

After discussing the world wars one would need to discuss how technology has made the likelihood higher of such event due to more and more commercial applications easily being militarized. To the fact that there are now five areas a major conflict will be fought in, Air, Water, Land, Space, and Cyber. Add to the fact the asymmetrical warfare is more likely due to the above technologies and the economic bargain off many asymmetrical tactics.
Next one would then need to using gaming theory and examine how other militaries are in position to cause economic harm to U.S. interest and or the world and how differing military spending strategies effects there responses, and the economic impact of the various scenarios.
One would then need to discuss this spending and conflict scenarios against spending for small wars, or conflicts against smaller nations, such as the Afgan and Iraq wars.
Throw in a lot of political science, how human nature does or does not lead to violent solutions, how to measure humans need for safety, and numerous other major military considerations I am currently not aware of. Off course one would also have to agree to the size of the economic benefits of not spending the money on the military.
I think we could then frame the discussion and actually prioritize the types of military spending, and what the proper range of military spending should be worldwide and for the U.S.

That would be an interesting economic inquire to get into. That is try to come up with some model on what the optimal spending for the military should be.

I tend to agree with the idea that the U.S. Military almost every year should get the Nobel peace prize for the above reasons.

MernaMoose writes:

Brian C,

That would be interesting. And much more rational than the typical hard-wired knee jerk response that's auto programmed into Ds, Rs, and Ls.

Of course there's also the fact that the defense industry does not and cannot function as a free market, by and large. It would be nice to see some analysis directed to trying to structure this industry in such a way as to get the proverbial "best bang for the buck".

DOR writes:

Speaking of budgets, I was fascinated to realize that Bill Clinton’s last budget, released at the beginning of 2000, was more than 95% accurate, at least as far as the 10-year nominal GDP growth is concerned (+4.5% per annum, vs. an actual of +4.3%). The difference, of course, is that Clinton forecast $2.3 trillion in surpluses, as opposed to the $3.1 trillion (on-budget) deficits suffered during 2000-09. It makes for a good hours thought exercise to compare the budget with reality, and the Congressional Budget Office (cbo.gov) has everything one needs, in spreadsheet format.

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