U.S. gov't & military spending at the end of the Cold War

I ran across an article in U.S. News & World Report (Oct. 6 2003) concerning a change in U.S. military deployment due to a foriegn policy shift from a "containment and deterrence" strategy, wherein the the U.S. generally operated large bases in friendly territories, to a strategy of "pre-emption", wherein a widening array of smaller bases are being spread across an area the Pentagon dubs the "Arc of Instability". While the article itself is fascinating reading for the main message it was conveying, I was struck by statistics they showed of the U.S. military budget as a percentage of GNP in the latter half of the 20th century and its reflection of the Reagan administration era and the supposed inflation of military spending during the Cold War. I was unable to accept the data at face value without some corroboration, so I did a little digging and turned up a similar set of (corroborating) figures from another source.

Basically, U.S. gov't spending (all expenditures combined) remained stable (growing steadily at a very slight rate) for peacetime periods from the advent of our society until about 1930, having spiked during major conflicts then returned to pre-wartime levels. Then it rose sharply during the depression years, then again dipping slightly before spiking to nearly 50% of the GNP during WWII. Instead of returning to pre-wartime levels (about 5%) it only lessened to about 15%, and began steadily increasing. I fully expected to see a spike in gov't spending as a whole during the Reagan administration years (1980-88) but the fact is there was no spike.

the source of this information is here; the article is interesting reading, but this is the graph.

US Gov't spending, as a percentage of Gross National Product

According to the figures in the U.S. News & World Report article:

U.S. defense spending for 2002 was $348.5 billion, or 3.3% of GNP. China was next on the military spending list in actual dollars ($55.9 billion, at 4.1% of GNP) followed by Russia ($50.8 billion, 4.8% of GNP).

During the Reagan administration, military spending progressed from about 5% of GNP to peak at about 6-7% (best estimate from the graph I'm looking at) and returned to 5% by the time Bush took office. Military spending continued to fall steadily throughout Bush's and Clinton's administrations to a low of about 2%, and has since risen to approximately 3%; it's projected that the end figure for 2005 will be about 3.5% of the GNP.

Bearing in mind that military spending has actually decreased steadily over the last 25 years, it's interesting just how much gov't spending on the whole has increased!

My main point though, is that from the figures I've seen, contrary to popular opinion (including my own), any increases in military spending during the end of the Cold War must have been from cutbacks in gov't spending in other areas and/or the economy must have been growing proportionately- because the gov't's overall spending wasn't significantly impacted.

Doing a little more digging, I found the U.S. Dept. of Defense budget report for fiscal year 2003, in PDF format (available here) and pulled this from it. The report generally uses Gross Domestic Product (GDP) rather than Gross National Product (GNP) when contrasting the military's allotment of gov't spending to economic indicators. From the dictionary definitions I can find, the two terms seem interchangeable. GDP is generally considered to be the standard indicator of the state of the economy, and is defined as the "total market values of goods and services produced by workers and capital within U.S. borders during a given period, usually 1 year".

US Dept of Defense spending figures from the 2003 fiscal year budget report

According to the data above, the Defense Dept. budget increased from about 49% of GDP to about 70% during the Reagan administration. Another table in that same report indicated that defense spending roughly doubled in absolute dollars during the 1980s. If my math is correct, I believe it follows then that GDP increased by roughly 250% in the same period, or 25% more rapidly than military spending in absolute dollars. See a flaw in my analysis (always possible)? Email me!

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