Thursday, July 22, 2010

National Defense Spending Is Growing Fast

Yesterday I talked about all government spending related to security. Today I'm looking at the recent rise in National Defense spending.  And I do mean rise.  In the last 10 completed fiscal years, national defense spending has increased by 367$ billion and is expected to increase again by the end of this Fiscal Year.  Here's our Defense spending since 1962.
(Click here for Numbers)
You can see some trends in that spending.  The first trend was a quick rise in the late sixties - presumably caused by escalation in Vietnam.  Then, as U.S. involvement in Vietnam winded down, national defense spending trended slightly downward.  Then it started heading back up in the late seventies.  In the eighties that slight upward trajectory skyrocketed until 1990.  Presumably, it leveled off in the 90s because there was no longer a cold war to fight.
In 2002 the recent sky rocket in National Defense spending started after 9/11 with a renewed interest in HUMINT and the wars in Afghanistan and Iraq started.  The cost of National Defense has continued to rise as Afghanistan, Iraq, and the GWOT, have continued on.
While these numbers might seem large it actually gets worse.  I haven't factored in the cost of VA benefits.  If there was no military, there would be no veterans, and therefore no VA, so it's only fair to factor VA costs into total National Security Spending.
(Click here for Numbers)
While the VA doesn't add a lot of spending, it does add enough that it's going to put Fiscal Year 2010 spending over the 800$ billion mark.  That's all spending, in a single year, just on National Defense - not counting law enforcement.
The recent rise in National Defense spending has been large and steady.  I graphed the percentage increase in National Defense spending for every year singe 1963.  So it will be negative when we spent less defense money and positive when increasing from the year before.  I show this to demonstrate that simple inflation does not explain away the large increases.
(Click image for larger view.  Click here for Numbers)
In the last decade, National Defense spending has risen by 5% or more every year for 9 years in a row.  The closest comparison is the timeframe of late 1970s to early 1980s.  That was a time when National Defense increases stayed above 5% or more for only 8 years.  This has been the most consistent large rise in national defense spending since 1962.
For those interested, I created a similar chart that shows the percentage increase of Defense and VA combined.  The number of years in a row where the increase is above 5% decreases by a year for both the recent increase and the 70s/80s time frame.
Whether you agree with all this national defense spending or not is irrelevant.  It's putting a huge burden on the budget.  This huge increase is a part of the explanation for the rise in our budget deficits.  It's hard to see how any hopes of a balanced budget can exist without reducing the National Defense budget.  It's possible, but one would have to either drastically raise taxes, or drastically cut the rest of our spending.
Some might say that cutting down the rest of our spending is the way to go.  So let's explore how we could maintain this level of national defense spending, balance the budget, and do so without raising taxes.  The last time we balanced the budget was FY2001.  In that year we spent 352$ billion dollars on the VA and National Defense.  In FY2010 we're set to spend 814$ billion.  Let's say that the 2010 estimate is off by 14$ billion and make it 800$ billion even.  Now, let's say that we didn't raise our defense spending at all since 2001, except for adjusting for inflation.  By rounding up (way up), I'm gonna say that the defenseVA spending should've stayed around 400$ billion.  That's half of what we spend today.  So, to avoid raising taxes, balance the budget, and not decrease our military spending, it would take 400$ billion in spending cuts out of the rest of the budget to accommodate this recent rise in military spending.
Total on-budget spending in 2010 is estimated to be 3,164$ billion dollars.  800$ billion of that is National Defense and VA.  That leaves 2,364$ billion for everything else.  We have to find 400$ billion to cut from that.  That's a 17% (across the board) budget cut.  That would be 17% that would have to be made in addition to accommodating the historically low tax rate and the rest of the spending increases since 2001 being cut.  This 17% cut would also have to apply to things like border security, customs, and all the other things that keep us safe. Otherwise, the spending cuts would have to be even higher.
Of course its possible to do all this, however, I can't imagine that there is a political will among the people or the politicians to support the kind of drastic spending cuts this would take.  Bottom line, to balancing the budget is going to require some combination of cutting defense spending, cutting other spending, and higher taxes.
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