What motivates the US Defense Budget?
(Recent trends and observations)


by Sebastian King
copyright 2004

Table of Contents
A) Introduction.
B) Defining the defense budget.
C) The recent evolution of the US defense budget.
D) US vs World Military Spending at the end of the Cold War.
E) The 2nd Quadrennial Defense review and the continuation of preemptory deterrence.
F) The 3rd Quadrennial Defense Review and NATO expansion.
G) The 4th Quadrennial Defense Review and the War on terrorism.
H) An alternative explanation of the inflated US Defense Budget: the political sway of the military-industrial complex and the arms trade.
I) Conclusion: Alternatives to increased spending.

A) Introduction.
 The role of the US as the unchallenged international military power since the end of the Cold War relies on the Congress’ willingness to pass the proposed military “defense” budget each year. However, in recent years drastic increases in military spending have been accepted with very little congressional debate or time for reflection. Under the Bush Jr. administration the surveillance of spending by the Pentagon has also become less vigorous, and what is called “discretionary spending” has also greatly increased in comparison with mandatory government spending. This paper investigates the political environment which has allowed such changes to occur. An attempt is made to describe the intricacies of the US defense budget and its evolution through the administrations of George Bush Sr., Bill Clinton, and George Bush Jr.. In order to rationalise the increases in the defense budget, particular attention is paid to the Pentagon’s evolving military strategies, the political sway of the military-industrial complex, the role of the arms trade and the supposed war on terrorism. Finally, alternative visions of US defense strategy are proposed.

B) Defining the defense budget.
Every year when the new budget comes out in the US, there is much controversy surrounding the exact amount of the defense budget. Almost no two newspapers will agree on the figures, and if they do they will disagree on the dollar increase, or else on the percent increase, from the previous year. This year when the budget for the old Fiscal Year (FY) 2003 was released, major US newspapers quoted the defense budget as being $355 billion, $365 billion, and $382 billion. While none of these reports are necessarily false, it is important to recognise that every media source will decide which factors to take into account according to their political inclination. The Conservatives will always argue that the budget is too small, and the Liberals that it is too big. More radical sources have quoted the military budget of being up to and exceeding $800 billion.
What is important to retain from the debates surround the defense budget are the different factors involved the calculations, and the associated budgetary terms. There are at least five different factors to consider when analysing differing reports on the US military budget: discretionary spending vs. mandatory spending, budget authority vs. outlays, function vs. agency/department, federal funds vs. unified budget, dollar vs. real growth and present vs. past spending.

· Discretionary funding includes budget items that Congress is allowed to tinker with, as opposed to mandatory spending items (such as interest on National Debt or retirement pay). Military activity accounts for 51% of the 2004 discretionary budget.
· Not all defense spending is done by the department of defense  (DoD), so a distinction is made between “function” and “agency/department spending”. For example, in FY 03 the Department of Energy spent $17 billion developing nuclear weapons, which accounts for the difference between the figures $365 billion and $382 billion often quoted for 2003. Other agencies that contribute to the total military function are the Coast Guard, Homeland security and NASA.
· Since the unpopularity of the Vietnam War, the federal government now cites it’s defense budget as a percentage of its “unified budget”, and not its “federal funds”, in order to make this percentage appear smaller. The  “unified budget” includes trust fund money which is raised separately and is ear-marked specifically for particular programs (such as Medicare deductions in paychecks).
· The term “real growth” is often used instead of “dollar growth” to describe changes in the military budget. Real growth is a comparison based on inflation rates which compares the budget in constant, rather than in current, dollars.
· “Present spending” refers to money spent by the government on present military and defense programs, whereas “past spending” refers to payments towards the debt to finance previous wars. Groups such as the War Resistors’ League consider 80% of government debt payments to be military-related.

It is important to recognise that wars are not paid for by the defense budget. For the simple reason that it takes two years to develop a one year budget, and wars cannot be anticipated that far in advance. However, by increasing the discretionary funds available, the government is effectively foreseeing future wars, and thus increasing its financial war-making capacity by strengthening the Pentagon. The defense budget also does not directly enhance homeland security. This function is mainly carried out by state and local governments, the FBI, the FEMA or the Coast Guard. The term “defense budget” applies uniquely to federal funds delivered to the DoD. According to the White House, defense budget in 2004 accounts for 17.5% of total federal spending in FY 04. Based on a “unified budget”, this figure does take into account past military spending, supplementary appropriations, or any military activity outside of the DoD.  Other calculations performed by the Centre for Defense Information, or the War Resistors’ League, find that the actual percentage is up to 47% of the federal budget.
The latter figure is far more accurate in representing the military character of the United States government, but by taking into account debt payments towards past military projects it is therefore less dynamic, and it does not necessarily reflect current military issues, trends and strategies. The higher figures also includes many costs and factors that may be hidden until after the fiscal year is passed, and whose current political relevance are not necessarily considered by congressmen. Therefore, in this report the government figures are taken at face value in order to illustrate and explain the short-term variations in the supposed “defense budget”, as voted by Congress.

C) The recent evolution of the US defense budget.
On the following page is a graph of the US defense budget since 1979, including the outlays presented by the Bush administration from FY 03 to FY 08 (figure 1). Also included is a comparison over the same period of the Defense budget compared with GDP and compared with the total outlays for each year (figure 2). The data from which these graphs were constructed can be found in the FY ’04 budget documents provided by the US Office of Management and Budget.

                                                        figure 1

                                                        figure 2

Of all the trends displayed in these two graphs, the most significant is the constant dollar evolution (real growth) of the defense budget, in figure 1. Many will cite the current dollar growth as an indicator of the extreme projected increase in the military budget, but this is exaggerated, because it ignores inflation. However, one might question the methods used by the budgeting office in calculating the predicted inflation rates, as differing inflation models could provide room for manipulation.
Also interesting is the Defense Budget as a percentage of the total yearly outlay. However, it must be remembered that increases in any other sector, or even increases in the discretionary “non-defense” budget, often used for military activity, will actually decrease the apparent Defense Budget as a percentage of the total budget.
The Defense Budget as a proportion of the annual GDP is a measure that may seem irrelevant, as it assumes a logical link between the US industrial capacity and its military spending. Nonetheless, it is often quoted by Republicans, as it is the only downwards slope that they can find. In times of industrial growth, this graph will show military spending to be declining, while its real growth may be increasing.
 Figure 1 displays three major trends of the Defense Budget, both in current dollars and in constant dollars. The first trend is a sharp increase from 1979 through to the end of the Cold War period. The Defense Budget increased throughout the Cold War, but some of the most rapid increases were during the Reagan regime, as shown here, 1980-1988.
The second major trend, also seen in both elements of figure 1, is a decline in defense spending after the collapse of the Berlin Wall and the natural consequence of the end of the Cold War, in 1989.
The third trend shows a new increase in defense spending, which was first hinted at during the Clinton administration in 1997, decreasing again in 1998, increasing again gently in 1999, and rapidly increased as of 2000 with the Bush Jr. administration. This last trend accelerates under the Bush administration’s future outlays until FY 08. In constant dollars, this growth matches in FY 08 US military spending at the height of the Cold War, though in current dollars this former maximum was already exceeded in FY 01.

D) US vs World Military Spending at the end of the Cold War.
Despite reductions in the US Defense Budget at the end of the Cold War, the military spending of the US relative to the its friends, allies, and enemies increased significantly from the period of 1986 to 1994. Table 1 below shows the percent changes in military spending of selected groups over this period.

Table 1. Percent changes of military spending of selected groups, 1986-1994 % Change
1. World -35.2
7. United States -21.0
8. Non-US World -40.7
11. Potential Threat States1 -69.0
Source:US Arms control and Disarmament agency (ACDA), World Military Expenditures and Arms Transfers 1995(Washington DC: US Government Printing Office, 1996);                           Notes: 1For 1986 includes member states of the Warsaw Treaty,China, Cuba, Iran, Iraq, Libya, North Korea, Syria, and Vietnam. For 1994 includes Russia, Belarus, China, Cuba, Iran, Iraq,

This table illustrates how, despite a 21% decrease in constant dollars, the US budget actually gained an enormous edge over potential threat states, and over the entire world, including its former cold-war allies. During the 1986-1994 period, the US share of total world military spending jumped from 28% to almost 35%, and in 1994 NATO accounted for more than 55% (for reference, UN activity has consistently accounted for approximately 1.25% of world military expenditure).
When these same calculations are carried out using present-day figures, the same trends exist, and are greatly exaggerated. The US Defense Budget is now more than six times as large as that of Russia, the next biggest spender. It is more than 20 times as large as the combined budget of the 7 countries traditionally identified as the most likely adversaries, and it is 1.77 times as large as that of all of it allies combined.
This shift marked the beginning of a new era in US military policy. Rather than ensuring worldwide stability by parity with the Soviet Union, the Bush Sr. administration developed a policy based on “preemptory deterrence”. This policy assumes that no nation will produce a military challenge if they know that the US monopoly on military might cannot be paralleled. This policy requires a robust international US military presence, daunting superiority, and a vast technological edge – thus an unfaltering military budget.

E) The 2nd Quadrennial Defense review and the continuation of preemptory deterrence.
The end of the Cold War sparked the first real debate on military spending, when at last the whole of Congress was included in the debate. Until 1990, military strategy had been decided unilaterally at high-level “summits” by members of the Republican administration and a few key congressmen. Three years later, with the election of the Democrats, the 2nd Quadrennial Defense Review (QDR), termed the “Bottom-up Review”, was produced by the democratic defense secretary Les Aspen. The result was a further decline in military funding, though a continued increase in military spending relative to world figures.
The Bottom-up review focused on changing the shape of the military. It focused on major regional wars, and it advocated the need for the US military to be able to fight two wars at the time, notably in the Persian Gulf and Northeast Asia. These military goals seemed reasonable and necessary to the US government in the aftermath of the Gulf War, despite requiring comparable levels of spending, thus denying the US taxpayers their long sought-after “dividend of peace”. It paid much attention to the near-term future, and on the most familiar threats. There is an emphasis on planning to refight the Gulf War, rather than preparing for future challenges. By focusing on major regional wars, it also failed to set priorities for peacemaking missions. Despite lengthy debate, this document could not enunciate a clear national security strategy that defines the American military’s role in the post - Cold War era, except that the US should remain the world’s unchallenged military power.

F) The 3rd Quadrennial Defense Review and NATO expansion.
The 3rd Quadrennial Defense Review was prepared by Defense Secretary William Cohen in 1997, and it did not represent a fundamental shift in military thinking or spending. However, the 3rd QDR recognised the growing demand for smaller operations, and it looked more towards the long-term than did the 2nd QDR. This translated into a long-term investment in lighter, more mobile military technology that can be deployed rapidly to any corner of the world. Such technology is oriented towards establishing a sort of “military omnipresence”, touted as being essential to the restoration of law and order in peace support/peace enforcement operations. In this context, congress supported a renewed dollar increase in the Defense Budget for 1997, for the first time since the end of the Cold War. The administration justified this new increase citing the important role of NATO in maintaining peace in Europe, and NATO expansion soon became a fixation of the Clinton administration.
 After the collapse of the Soviet Union, despite their increasingly unquestioned and unique military power, the United States had found it increasingly difficult to find justifications and public support for their global military presence, including their continued activity in western Europe under the guise of NATO. It was leading up to the conflicts and NATO intervention in the Balkans that the congressional impetus was found for NATO expansion. In 1997 the US National Budget Office  (NBO) stated that the Defense Budget would require up to $125 billion dollars over 10 years to support NATO expansion. In order to make this request palatable to Congress, the Pentagon attempted to reduce the costs to present members of NATO, increasing the costs for new members, providing an estimate to Congress of closer to $12 billion. Though difficult to calculate, in the end the NBO estimates were much closer to the actual costs. The goals of this expansion were to keep European defense efforts focused on an institution in which the US plays a key leadership role, and maintain stability in Eastern Europe in a way that was favourable to US business and military interests.

G) The 4th Quadrennial Defense Review and the War on terrorism.
The election of the Republicans in 2000 marked a dramatic increase in military “discretionary” spending, and an increased attentiveness to new major competitors that may arise after 2010-2015. The Bush Jr. administration set out on a new quest of global military posturing to reinforce the US’s role as the unilateral international enforcer. Even more staggering than the $400 billion budget for FY 04 are the future outlays put forth by the current administration: $2.7 trillion by 2009, with a climax of $509 billion being spent in FY 09 - an increase of 54% over current levels. The budget document that outlines these plans also projects major tax cuts for big business, and an increase in the federal deficit from $200 billion to $300 billion in 2004.
In addition to these recent increases should be added the price of the war in Iraq. Bush’s requests for the war on terrorism totalled $87 billion in supplemental appropriations. This includes $66 billion for DoD classified activities ($51 billion for Operation Iraqi Freedom, $11 billion for Operation Enduring Freedom in Afghanistan, and $4 billion in aid for coalition partners and mobilisation support), and $21 billion for Coalition Provision Authority and Department of State (including $20 billion for relief and  reconstruction in Iraq, $1 billion for security and reconstruction in Afghanistan). However, nobody seems to know exactly how much the war in Iraq will cost. The OMB outlined four potential scenarios, costing up to $200 billion between 2004 and 2013. Assistant Democrat leader John M. Spratt calculates that Iraq reconstruction could reach $418.3 billion.
The September 11th 2001 terrorist attacks on the US certainly increased congressional approval of Bush’s war on terrorism and his supplemental demands. Interestingly, the 4th QDR, released in October 2001, remained relatively unchanged. In the immediate aftermath of 9-11 much immediate budgetary and policy action was taken by the Bush administration and congress, but it was without direction or long-term strategy. Very little modification was made to the 4th QDR, but many billions of dollars were added to the future outlays without explanation. Excluding the cost of the wars in Iraq and Afghanistan, the Pentagon has since received a $70.1 billion increase since FY 01.
In the budget address of the president, these proposed increases in military spending, about 13% higher than Cold War levels, were proclaimed to be necessary anti-terrorist measures, as a result of a war “that the US did not choose”. However, of the entire budget, only $2.4 billion was set aside for increased homeland security. In reality, the largest single program in the new budget is approval of up to $1.2 trillion for missile defense (by 2035). The FY 04 budget includes $9.1 billion for the purchase of the first 10 land-based interceptors in Alaska and California. The plan is to add 10 more land-based missiles by FY 05. Another large project is the development of the Robust Nuclear Earth Penetrator, or “Bunker Buster”. While these projects are being developed, the Pentagon has prepared a new weapons acquisition policy called the “5000 series”, which allows the missile defense program to be exempt from standard system checks and progress reports. Congress has thus lost a considerable measure of budget and quality control over the Pentagon.
The 4th QDR, presented by the Bush administration in 2001, is supposed to continue and accelerate the trend of “transformational technology”, which focuses on lighter, faster and more agile military technology, “to meet expanded obligations”. The major changes laid out in this big-picture document are the White House’s plans develop further microchip and automated technology, continue the development of the military’s light, mobile forces, and to retain the military’s heavy aircraft and tank forces, which were expected to be phased-out. The post-September 11 era of military spending keeps everyone in the Pentagon happy, by funding both “old military” and “new military” alike.
This new military strategy also includes ending the Anti-ballistic Missile Treaty signed during the Cold War, an end to the space cooperation system, a rejection of the Ottawa Land Mine Ban Treaty and the Comprehensive Test Ban Treaty. There has also been much discussion regarding the possible collapse of the 30 year-old Nuclear Non-Proliferation Treaty.

H) An alternative explanation of the inflated US Defense Budget: the political sway of the military-industrial complex and the arms trade.
In the last decade, terrorism against the US and US interests has doubled in relation to world terrorist attacks . However, this is not enough to account for the astronomical increases in defense spending. Protection against rogue states cannot be stated as the cause of the recent increase either, as the relative position of the US as a world military spender dwarfs both its enemies and allies. The push for “transformational” spending and for increased technology is also hard to explain, as it is impossible for a 3rd world terrorist group to launch a military attack that needs to be defended by anti-ballistic missile systems orbiting in space, which is the equivalent of a high-tech Maginot Line. Clearly a simple history of government military strategy is not sufficient to explain continually elevated defense spending in the post Cold War period.
 A more telling story would include the relationship between government subsidies for arms companies and arms companies’ subsidies of presidential campaigns. During the 2000 election campaign, the defense industry contributed $8,720,173 to Republican candidates and $4,789,381 to Democratic candidates .
In addition to election campaigns, the arms companies Lockheed Martin, Boeing, General Dynamics and Northrop Grumman together spent a total of almost $49 million in 1997 and 1998 in lobbying expenses. These same companies received $73.8 billion in DoD contracts awarded for 1998 and 1999. Lockheed Martin vice-president Bruce Jackson was finance chair for “Bush for President 2000” campaign. Secretary of Defense Dick Cheney’s wife, Lynne, served on Lockheed Martin’s board of directors. The energy company Halliburton, of which Dick Cheney is the ex-president, has moved from position 70 to position 18 on the list on the Pentagon’s top contractors since the  Republicans have come to power. Bush’s secretaries of the Navy, Air Force, Transportation, and Undersecretary of the Air Force are all former top executives of either Lockheed Martin of Northrop Grumman. The Bush family brings in 34% annual interest on the Carlyle Group, the world’s 11th largest defense contractor. This list goes on to include family, friends and political allies of many of the top decision-makers in Washington.
Equally interesting is an examination of the temporal relationship between the arms trade and the Defense Budget. The United States is having a hard time making a humanitarian case for its foreign policy while it is arming the world at the same time. American arms sales to the Middle East have skyrocketed since the Gulf War. With the election of the Republicans in 2000, arms sales surged from $30.3 billion to $36.9 billion, and US contracts then accounted for approximately one third of the world arms trade2. Sixty-eight percent of these government-subsidised arms exports go to third world countries.
 A perplexing result of 9-11 was the Bush Jr. administration’s decision to increase the list of countries eligible to receive US arms to include Armenia, Azerbaijan, India, Pakistan, Tajikistan and Yugoslavia, countries that were previously considered a threat to national security. This was approved by Congress under the  guise of supporting nations who fight terrorism. However a closer examination will reveal that many of the countries now considered threats to the US were armed by US corporations, Iraq being the most notable example. Thus, with the USSR dissolved, and the rest of the world decreasing their military funding, the US must arm the third world to create opponents and raise its own military budget to defeat them – thereby fighting a new Cold War against itself.

I) Conclusion: Alternatives to increased spending.
Defense spending trends since the end of the Cold War give rise to fundamental policy questions: what motivates the US Defense Budget? Does the military-industrial complex make the US stronger or weaker? How much money does the Pentagon actually need? And is “non-offensive defense” a viable military strategy to create and maintain world peace?
In recent years, governmental surveillance and controls of military spending have been loosened. The missile defense project has been the prime example of this increase in the Pentagon’s autonomy, and spending that tends to spiral out of Congress’ control.
The increasingly popular White House practice of ‘hiding’ military spending, by manipulating facts and figures, creating new budget terms, and tracing the Defense Budget as a percentage of the GDP is another method by which inflated Defense Budgets become acceptable to Congress and the public.
Those who support the necessity of the military-industrial complex to US strength will quote the increased arms sales to strategic countries such as Oman, Egypt, Indonesia and Turkey, who will be better equipped to prevent the spread of terrorism. The counter-argument is that arming foreign countries, notably third world countries, profits only the few American investors involved in the arms trade and that it fuels future terrorism against the US. Furthermore,  in attempting to create an environment of preemptory deterrence with no moral authority, the US is more likely to inspire military competition.
Every major defense-policy strategic review since the end of the Cold War – the 2nd, 3rd and 4th Quadrennial Defense Reviews – have followed the guideline of cutting government-owned defense infrastructure and privatising weapons production, yet very little government attention is paid to the profit margins of large defense firms. However, a study performed in the 1960’s by historian Professor Murray Seidenbaum showed that large defense firms made considerably more profit when dealing with the federal government than with other markets.
The government focus on winning two simultaneous major wars required buying lots and lots of big weapons systems, and was another source of excessive federal spending in the 1990’s. While the 3rd QDR in 1997 headed in the direction of eliminating this “strategic necessity” and focused on developing lighter, more mobile equipment, the 4th QDR in 2001 adopted both the old and the new military strategies (big and slow, fast and light), with a new push for technology, always cloaked by the doctrine of “self-defense” and “anti-terrorism”, in order to scare the American population and Congress into submission.
In a larger context, these doctrines and huge military expenditures are but a rational response to the larger needs of an elite ruling class in the US, even beyond military industrialists, in an attempt to protect global corporations and economic neo-liberalism. The Democratic party claims that, if elected, it would suspend, at least temporarily, the proposed missile defense program. Ralph Nader suggests a 50% decrease in the Defense Budget. However, a major overhaul would be needed in the US democratic process to change the long-term military strategy of the US government, including limitations on campaigns to exclude corporate funding (as is the case in France, for example), a decreased role for lobby groups, and tighter surveillance on conflicts of interest within White House.
In 1998, a National Defense Panel commissioned by Congress made several unheeded recommendations that would be far more conducive to maintaining regional and worldwide stability than the current practice of forward-deployed units and exclusive military clubs such as NATO. The panel suggested diverting NATO funds towards strengthening inclusive organisations such as the UN or the OSCE (the US has long been opposed to the development of an autonomous european army). The Defense Panel’s recommendations also include a tightening on the limits of arms transfers, and the ultimate reduction of the role of armed forces in American foreign policy.

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