Strategic Trends in the United States
In discussions about defense affordability, the defense budget of the United States is frequently measured as a percentage of gross domestic product (GDP).1 This chapter argues that strategic trends in the United States will reduce the relevance of thinking about the DoD budget as a percentage of GDP. The DoD budget as a percentage of discretionary spending will, however, become more relevant. The inevitable graying of the U.S. population will increase nondiscretionary federal spending at rates that exceed economic growth. With greater pressure being exerted on discretionary spending as a whole, the DoD budget will be squeezed regardless of the DoD budget as a percentage of GDP. Structural factors will reinforce this trend. That said, defense spending will continue to rise as the U.S. economy expands, but it will likely fall as a percentage of GDP due to the need to devote an increasing amount of resources to other areas. Plausible or even likely “wild-card” factors may further pressure defense spending. In this chapter, we estimate when additional pressure will be applied to the DoD budget and identify the portion of the DoD budget most likely to be affected by limits on discretionary spending. To permit country comparisons at the end of this monograph, we supply additional material, including projections of per capita GDP and energy supply and demand.
1 The Heritage Foundation, for example, has argued that U.S. defense spending as a percentage of GDP is too low. See The Heritage Foundation, Federal Revenue and Spending: A Book of Charts, undated.