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Tuesday, July 29, 2014

A look at national defense spending

U.S. federal budget spending
Overall defense spending as a percent of the national budget has dropped around 3% in 2 years

Defense spending accounts for a substantial portion of annual federal spending. As America seeks to pave a way to its economic future, questions about how taxpayer dollars should be spent are debated. Whether or not the U.S. defense budget is too large is officially a matter for elected officials to determine. Since for much of recent history, Americans have approved of high military expenditures via their votes, the results have been for a large national defense budget if government is indeed representative.


In 2014, total national defense spending is projected to reach $626.76 billion per the DoD, down approximately 3% from the 2012 amount. In 2011, defense spending comprised around 19.6% of total federal outlays, and in 2014 that amount is closer to 16.6%. As a percent of gross domestic product, the total defense budget is between 4 -5%, which is near an all time low despite the large dollar amount. This amount is also projected to decrease to closer to 3 - 4% in the coming years.  


To further illustrate defense spending in proportion to economic output, U.S. gross domestic product for 2011 was $15.09 trillion per the Bureau of Economic Analysis. Since, the DoDs expenditures for that year were $687 billion, defense spending constituted approximately 4.6 percent of the GDP. In 2012, the GDP was closer to $15 to $15.5 trillion, making enacted defense spending roughly 4.2 percent of GDP. Thus, in terms of GDP, defense spending is a much smaller fraction than defense spending as a percentage of annual federal funds spent.


According to the Bureau of Labor Statistics, “The current goal of the Armed Forces is to maintain a force sufficient to fight and win two major regional conflicts at the same time." This goal means base active duty employment are forecasted to remain relatively consistent, especially since age restrictions cause frequent turnover in the industry. To illustrate further, the BLS reports the military recruitment must amount to 165,000 persons per year in order to replace exiting service personnel.


The U.S. national debt is very large and continues to grow. Currently, it stands at over $15.87 trillion per the Treasury Department. Economic growth has also been stunted recently, and this places more pressure on the government's financial resources. Moreover, as entitlement costs rise, unemployment remains elevated and industries struggle, fiscal policy becomes a mechanism for solutions. For such policies to be effective, they must balance national functionality with effective defense spending.

Image: Johnpseudo; CC BY-SA 3.0