Military Spending/gross Domestic Product = Nonsense for Budget Policymaking
Higgs, Robert, Independent Review
Had we been inclined to borrow a phrase from Ronald Reagan, we might have chided the Pentagon bigwigs by saying, "Well, there you go again." Early this year, as in virtually every year since the Korean War, the military chiefs tried to minimize the enormousness of their proposed basic budget ($515.4 billion) by expressing it as a percentage of the concurrent gross domestic product (GDP). By indulging in this gambit, they placed themselves in a great deal of bad company.
As usual, the news media played along with this trick, which then occupied many commentators and fueled heated debates about the adequacy of the defense budget. The New York Times has got this year's show off to a bang-up beginning with a February 4 article by Thom Shanker, who noted, as if it were relevant, that "even the colossal Pentagon budgets for regular operations and the war efforts consume a smaller portion of gross domestic product than in previous conflicts" (2008).
Want to make this year's gigantic Pentagon proposal look small? All you need to do is to divide it by this year's GDP and then compare the resulting ratio to the ratio that obtained during the Korean War (13-14 percent) or the Vietnam War (7-9 percent). To make this year's spending appear almost tiny, dredge up the ratio for the fully mobilized years of World War II (37-38 percent). (1)
The current ratio, including the Pentagon's basic budget, the nuclear weapons program (run by the Energy Department), and the supplemental budgets enacted to fund the direct costs of the wars in Afghanistan and Iraq, comes to about 4 percent. Military lingo expresses that fraction as "only 4 percent." The military leadership, fearful that the future may ultimately bring a spending retrenchment after the fighting subsides in Southwest Asia, wants to make this 4 percent figure a lower bound on future spending. (2)
Secretary of Defense Robert M. Gates and Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, emphasized the importance of this limit. Said Mullen, "I really do believe this 4 percent floor is important ... really important, given the world we're living in, given the threats that we see out there, the risks that are, in fact, global, not just in the Middle East" (qtd. in Shanker 2008)--standard Pentagon gibberish that suggests a world populated by terrifying and deadly monsters intent on destroying this country root and branch.
Pentagon press secretary Geoff Morrell sang the same song. "The secretary believes that whenever we transition away from war supplementals, the Congress should dedicate 4 percent of our G.D.P. to funding national security. That is what he believes to be a reasonable price to stay free and protect our interests around the world" (qtd. in Shanker 2008).
A much more reasonable price, however, would be one arrived at with complete disregard for its relation to GDP. Recall that GDP purports to be the value at market prices of all currently produced final goods and services the U.S. economy brings forth in a year. It includes everything from hamburgers to computer software to H-bombs. Why, we might ask, should military spending bear any particular proportion to this figure?
Does it not make much more sense to assess the actual threats the country faces, to determine the optimal means of meeting or deterring these threats with a sufficient degree of confidence, and then to add up the costs of obtaining the stipulated means? Whether this total amount happens to be equal to 1 percent or 20 percent of GDP is entirely beside the point, which is to protect the American people from likely external attackers. …