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The Four Percent Fallacy

24 Feb 2008 09:17 am

Sure the defense budget is large, the saying goes, but in percentage of GDP terms it's lower than it has been for much of the 20th century, so what's the problem? Cato's Benjamin Friedman has a good response to this line of argument:

Percentage of GDP is useful for historical comparisons of defense’s economic burden. Carafano substitutes the question of what we can afford for what we ought to spend. The United States can afford to spend four percent of its GDP on defense; indeed we can afford to spend far more. That doesn’t mean we should. Whatever your politics, money spent on defense means money not spent on something else: private investment, deficit reduction, infrastructure, a car, etc. The problem is opportunity cost, not economic malaise.

And, indeed, there you have it. We could spend much more on the Pentagon if the objective circumstances merited doing so. But they don't. The opportunity costs are large, the need lacking, and the benefits of ever-growing military spending are small compared to the benefits of spending that money on productive investments (both private and public sector) or consumption goods.

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Comments (34)

Really what we need is for Boeing and Lockheed-Martin to branch out into road repair and solar technology. They're going to get their money dammit. We just don't have any options on what to spend it on.

MY, you are so un-serious. 9-11 justifies more F-22s, F-35s, navy ships, etc. If we don't borrow more from China to give to defense contractors, the terrorists win!

Actually, in a budget deficit, it is much more than 4% when the cost of borrowing the money is factored in. And when, someday, the costs of debt repayment crowd out other budget expenditures, the opportunity costs represent not only lost opportunities today, but also lost opportunities tomorrow.

Matt,

Your problem comes when you say "We could spend much more on the Pentagon if the objective circumstances merited doing so."

You are having an argument with people who believe, as at least some of the Republican base and elite do (see Giuliani's rhetoric during his abortion of a campaign), that we are actually facing an "existential threat" from Islamofascosuperduperextremists, as if Bin Laden will soon be leading a victory parade in Manhattan
if you elect Barack Obama.

And if you believe in silly things like the tooth fairy, or the fundamental equivalence of Al-Qaeda and the German Nazis, then a WWII level of military spending might actually be reasonable.

Of course you don't have to convince me, but you weren't really trying to. You have to convince conservatives that they are wildly overestimating the threat from Muslim radicals before you have a chance of convincing them that they're wildly overspending to face down that threat.

The smartest words uttered by any American president since 1945 were from Dwight Eisenhower: "Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people. This is, I repeat, the best way of life to be found on the road the world has been taking. This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron. […] Is there no other way the world may live?"

See here:

http://www.harpers.org/archive/2007/11/hbc-90001660

Don't you understand? We have to defend Taiwan. That's why we need another $500 billion from China to buy F-22s. It's a virtuous circle jerk.

Well, setting aside the severity of the terrorist threat, which I don't believe to be anywhere near the threat we faced from the Axis powers, we aren't even focussing the defense spending on terrorist related programs. By far, the vast majority of spending continues to go towards Cold War-era heavy weapons systems such as tanks, destroyers, submarines, etc. The Pentagon is a system that has a momentum of it's own at this point. I live in a community with a Lockheed Martin plant and I know many engineers that work on these systems. From what I can see, engineers just like to figure things out, and they wouldn't much care if they were making helicopters or solar panels.

Well, setting aside the severity of the terrorist threat, which I don't believe to be anywhere near the threat we faced from the Axis powers, we aren't even focussing the defense spending on terrorist related programs. By far, the vast majority of spending continues to go towards Cold War-era heavy weapons systems such as tanks, destroyers, submarines, etc. The Pentagon is a system that has a momentum of it's own at this point. I live in a community with a Lockheed Martin plant and I know many engineers that work on these systems. From what I can see, engineers just like to figure things out, and they wouldn't much care if they were making helicopters or solar panels.

This argument cannot be separated from the role the United States assumes in the world. Even in a multilateral, liberal internationalist policy (which is where I kind of find myself), the United States would to have a sufficiently strong military to project power around the world and deter aggression (think of Iraq/Kuwait in 1991, the Balkans in the late nineties, and frankly, China and Taiwan today). If you are going to have a military power that can project power around the globe, you are going to need a fairly large Navy and Air Force (although force structure, and the enormous investment on tactical aircraft (3 fighters - F-22, the F-35, and F-18b Superhornet - is very questionable expenditure and reflects the sad fact that fighter pilots dominate the high command of the Navy and the Air Force).

Now there is an argument that we should not play such a role and that we should allow regional balance of power situations work themselves out without our meddling. An adoption of a small power foreign policy by the U.S. would mean that we could have a far smaller military although some minimal expenditure would have to be maintained if you wanted to keep an industrial base (one of use of an expanded Aerospace Program, manned and unmanned, would mean that you would have industries that could adapt to building weapons again if a real threat did arise).


It is an abuse of the English language to talk about spending 4% of GDP on "defense". The agency that lives in the Pentagon, and on which we have lavished many trillions of dollars over half a century, should properly be called the Department of Offense.

"Defense" means protecting your home ground. As of 2002, we officially acknowledged that we needed a whole new Department for that. "Defense", as used in reference to the Pentagon, is political correctness run amok. The old name, "War Department", was apparently not cuddly enough.

So let's have an honest debate: should we spend X% of GDP on OFFENSE?

-- TP

As the Best and the Brightest, and others, make very clear, we *can't* afford to spend this much on the defense budget.

In order to pay for Vietnam, Nixon got Burns to print money to reduce the value of the debt. Carter got blamed, of course, but stagflation was a direct result of Johnson/Nixon policies on Vietnam.

But of course this is quite wrong. We can't even occupy a medium size country like Iraq with the low level of investment in the military that we have.

Meanwhile, we have the mixed messages from the Left. Obama is complaining that a platoon had to go to Afghanistan at half-strength. Matthew is complaining that the circumstances don't merit more investmen in military. Better surrogates, please!

When DHS was formed, we should have called that thing the 'Department of Defense' and gone back to the classic 'Department of War' for the Pentagon.

And while it's not the GDP % that's a problem, it's not the opportunity costs per se.

It's that every dollar increase in defense, the deficit increases be that exact amount, because we have been unwilling to raise revenue commensurate with what we want to spend.

And because DOD is about half of discretionary spending, it is currently the biggest culprit of why we're seeing the dollar slide and current inflationary pressures.

Al, I'm just curious...

Do you not see the fallacy in your argument?

Al,

I know I'm just acting like a silly little trout here, but there is one element that ties together Matthew's complaint about the size of the Pentagon budget and Obama's statements about a platoon going to Afghanistan short-staffed: that we should be spending less money on Iraq.

Also, one correction to your statement:

We can't even occupy a medium size country that is hostile to our presence like Iraq with the low level of investment in the military that we have.

So, in short, let's spend less money occupying countries hostile to our occupation. That would solve many problems.

Better trolls, please!

Ethel-To-Lilly,

You're right, it doesn't account for borrowing costs. It also doesn't account for nuclear weapons production (Energy Dept. budget), Coast Guard and border patrol activities (Homeland Security budget) and, oddly, enough the two wars we're currently involved in (Iraq and Afghanistan are funded via special appropriations) or the cost of caring for wounded soldiers and supporting KIAs' widows and orphans (VA budget).

The total cost of national security is far higher than the Defense Department's $500 billion budget, it'd more accurate to price it closer to $1 trillion.

And right on about Ike. Its criminal how much money we waste on "defense" and he seems to be the first and last president to point out what a war economy truly costs us.

Sorry Al, but the problem isn't so much investment in the military, but the investment in modern tech boondoggles, rather than using that money to perhaps make military service a more attractive option for any but the desperate.

Cato's Benjamin Friedman has a good response to this line of argument:

No, it's a stupid response. Share-of-GDP or share-of-budget numbers are a reasonable prima facie indicator of the relative priority of different types of spending. In the absence of a compelling argument that the relative priority of military spending today is significantly lower than the norm for the last few decades, it is perfectly reasonable to argue that the share-of-GDP level of military spending should be maintained.

All three presidential candidates appear to want to maintain or increase our level of military spending.

David Samuels,

I know I'm just acting like a silly little trout here, but there is one element that ties together Matthew's complaint about the size of the Pentagon budget and Obama's statements about a platoon going to Afghanistan short-staffed: that we should be spending less money on Iraq.

But Obama wants to increase the size of the military, adding tens of thousands of additional troops, and unspecified increases in equipment and training.

Better trolls, please!

Mixner's right about Obama's position, and to me personally, it's the most disappointing part of his campaign (and Nader's strongest argument).

Mixner was also right on an earlier thread about people's preferences wrt to zoning and suburbia, etc... (wish I'd gotten in on that one), although I do wish Mixner would acknowledge the 'tyranny of the majority' problem, it is a big problem, and I think Mixner would strengthen his argument if he acknowledged it.

At risk of going off topic here, Americans in fact HAVE chosen to live in exurbs in big houses and commute long ways in big cars. In my view, this is clearly unsustainable (Mixner, fly low over Phoenix sometime, if you haven't I think you'll be shocked) and I think circumstances, rather than preferences, might dictate our future.

Like Yglesias and other progressives, I'd like to get out in front of this obvious problem, as it will make the transition easier... don't you agree Mixner?

That said about Obama and military spending, I think Obama's rhetoric suggests a far more conciliatory tone in foreign policy... that might lead to defense spending cutbacks.... or that might just be in my head.

All through our history, the highest order spending priority of the Congress, the Constitution, the Commander-in-Chief has been defending the nation. Not entitlements for the elderly, free food & housing for NOLA parasites, or free school and medical care for illegals.

In the Cold War era, 4-5% of GDP was affordable.
Investment in military was hardly all money down a rathole. You got primacy in aerospace, new highways, modern telecomms, megamillions murdering communist totalitarianism stopped cold except for the stab in the back of S Vietnam, the Internet, and sophisticated training that 18-22 million Vets then used to start successful careers. Other programs you can more credibly argue, truly pissed taxpayer money away and even made our problems worse. Fed welfare creating more welfare parasites, more Fed regulation of businesses reducing jobs and ability to compete, war on drugs creating better and cheaper drugs and more of them.....

But in many ways, the public thinks it got it's money's worth from defense spending.

And knows that it is not traditional defense spending at 4-5% or so of GDP peacetime that is bankrupting the country - but explosive Fed Gov't mission growth and the Entitlements.

And the public is a little more sophisticated than Lefty anti-military who argue that we need no sophisticated arms because we face no modern military threat - just savage Islamoids that must be fought with "more JAG lawyers to prosecute Marines, more body armor". They understand that we start with America wanting air superiority over any foe, the logistical ability to project force overseas, and a Navy capable of maintaining freedom of the seas, access to strategic resources and defeat any modern foe it must face.

There are TWO major errors in the "only 4% of GDP" argument.

ONE was addressed above --i.e., that a lot of military spending is concealed in other budgets and not included in DOD's formal budget. Throw in the other items (including Intelligence Community's budget) and you're talking closer to 8% of GDP.

Probably unsustainable in the long run -- witness our huge trade deficits, the collapse of our currency, and our huge debt. Not to mention an aging population with Social Security underfunded by $8 Trillion and medical care for the elderly underfunded by $40 Trillion.

The SECOND major error is to compare the US spending post WWII with today's environment. In 1945, The US had NO real competitor on the economic scene. The rest of the Developed World had been destroyed -- Japan, Western Europe (Germany, France, Great Britain) , Russia and China. Hence our corporations grew like widefire as they spread out across the globe and the rest of the world looked to Ameica to supply demand.

BY CONTRAST, the US is being challenged today by multiple Economic competitors who are cleaning our clock. The combined GDP of the EU equals ours, China's economy is growing much faster than ours, Japan is still a formidable competitor (ask GM and Ford --preferably before they going into bankruptcy), India is challenging us in High tech and Russia controls a lot of oil deposits.

If I was a leader of one of those other competitors, i could not DREAM of a better situation than to have the USA led into decline by a moron like George W Bush.

George --who complains that the USA is "addicted to oil" -- at the same time that Dick Cheney has been the biggest drug dealer in town and the BUsh administration has done NOTHING to develop alternative energy supplies.

Of course, the "only 4 percent" is not really an ERROR -- but rather the typical Republican DECEIT. First lie about the true cost of Bush imperialism -- then cover up the major disaster resulting from the Bush policy.

Re Chris Ford's comment "All through our history, the highest order spending priority of the Congress, the Constitution, the Commander-in-Chief has been defending the nation"
-----------------
This ,of course, is utter bullshit.

The basis for our government was laid down in the Declaration of Independence:

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed,

That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it,

and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness."
-----------

It was a fundamantal tenet of our country for 160 years that a standing army in peacetime was to be avoided-- both because it was economic ruinous and because it was a threat to our liberty.

10 years after the Revolution ended, the federal army consisted of about 10 caretakers at West Point. Because our knew that our citizen militias could defeat any invader.

The same is true today -- you could scrape the entire DOD tomorrow and the people of this country could still DEFEND this land. As someone noted, DOD should more properly be called the Department of Offense. Because it doesn't defend this country -- it "defends" the foreign investments of our superrich. 911 showed that -- as did our undefended southern border 5 years after 911.


If the NRA membership weren't such morons, they would prepare to defend themselves against the Republican leadership -- because those whores are a far bigger threat to this country than Al Qaeda could ever hope to be.

It was not Al Qaeda who stole $3 Trillion from our Social Security/Medicare Trusts and sent 4000 of our sons to their deaths in an unnecessary war for Big Oil.

"But Obama wants to increase the size of the military, adding tens of thousands of additional troops, and unspecified increases in equipment and training.

Better trolls, please!"

Does he want not only to increase the "size" of the military, but increase spending as a share of GDP? That seems to be the question. The question is not whether this or that program should be increased or decreased on the merits but whether share of GDP is a good measure.

One reason this standard is strange is, as MY points out, affordability does not seem to be the issue. Another reason is that the fact that our economy has grown does not necessarily mean that we need a bigger military. The rationale for pegging spending to GDP seems of the same kind that conservatives decry when they complain about the expansionary tendencies of the government--it's a political tool bureaucrats use to keep and increase their turf. Or, in the case of Republicans, it's a way to defend the interests of defense-related corporations who fit in roughly with their own pro-military programme.

I'd take the 4% of GDP argument more seriously if the Republicans pushing it called for 4% tax on GDP to pay for it.

Williams - This ,of course, is utter bullshit.
The basis for our government was laid down in the Declaration of Independence:
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

Williams, as many silly people do, quotes irrelevant early independence proclaimations as the basis our state was organized on and ignores the failure later of the Article of Confederation, why they failed, and the arguments of the Federalists that formed the basis of the Constitution. Silly Lefties also ignore that the goals of the Constitution, like any Charter - are not laid out in the after thought Amendments to the document, but in the Preamble. Which discusses establishment of justice and the need to provide for the Common Defense, and insuring domestic tranquility. And other nice stuff we the People were supposed to do. Which didn't include 90% of current Federal budget expenses into other areas the Constitution never specified.

Shutting down the military to pay for free dental care for illegal aliens is like shutting down all the Courts to pay for the prescription drug benefit. Stuff the Constitution says is indispensible for to meet the Preamble Goals Lefty-sacrificed for add-on crap not in the Constitution.

It was a fundamantal tenet of our country for 160 years that a standing army in peacetime was to be avoided-- both because it was economic ruinous and because it was a threat to our liberty.
10 years after the Revolution ended, the federal army consisted of about 10 caretakers at West Point. Because our knew that our citizen militias could defeat any invader.

Trite garbage. Obviously debunked when Napoleon's citizen Army made mincemeat of local militias, though Congress was slow to understand how pathetic our militias were until DC was burning thanks to 3,000 British Marines the ragtag militia could not stop - and regular Army Canadians under British command made our northern militias their 'lil bitches from Lake Erie to Maine. Buffalo burned and America militia rabble fled south past Albany.

Jackson's regular Indian-fighting forces, and the regular Navy, plus the concern of the French joining in finally stopped the British bitch-slapping and transformed the militias into functional arms of the US Army. 30 years. Not 160.


Sorry Chris Ford, some of us don't believe this:

http://www.chris-floyd.com/content/view/1440/135/

is a good way to spend our money.

Maybe you do, good for you.

First, I agree with those who note that % of GDP is really the only practical way to express the priority attached to spending, on defense or anything else. And even with Mr. Williams' maximized total, we're spending significantly less than in previous wars--over 9% on Vietnam; about 19% on Korea; and damned near a third of total GDP in WWII.

Second, I agree with those who say that we waste a phenomenal amount of money on military procurement by buying lots of things we don't actually need.

Third, do I really need to point out the silliness of suggesting that a dollar not spent on defense (or snack food, or cosmetics, or anything else) will automatically mean a dollar spent on health care (or transportation, or education, or anything else)?

Finally, for most of my lifetime, official US policy was to maintain a military establishment capable of fighting and winning two major wars in two different places at the same time. Do people really think it's acceptable that we should now settle for a military that's not able to support two democratically-elected allied governments win low-intensity conflicts in permissive environments (which is to say at the request rather than with the resistance of those governments)?

That's well stated Powell, the pro-military hawks should pay close attention to your 2nd point. Anyone who has worked in Congress can tell you that certain Congresspeople foist certain equipment and systems that the Pentagon itself doesn't even want.

You ask an excellent question at the end, my answer:

We should have a military capable of say, fighting in Iraq and Afghanistan.

The question is, although they should be kept capable in two hypothetical situations, is it WORTHWHILE for them to be fighting in the two actual places they are fighting now?

Also, it sounds like you think cutting the items you outline in your 2nd point would NOT undermine our ability to do as you describe... so why not do it?

So sure, we can afford 4%, but if we could do the exact same things we are doing now at say, 3%, why not?

Even better, if we leave Iraq (yes, hugely controversial) because we conclude we should no longer be there, perhaps we can do what you describe with 2.5% or even 2%.

Finally, I'm not sure I'm willing to cede the 'only 4%' point, I think it's extremely likely that residual costs for Iraq through the years will equal considerably more.

Christ, what a pack of morons...

We don't need to be in Iraq OR Afghanistan. And anybody with a brain could have gotten rid of Al Qaeda in a weekend with a tenth the force the US military expended in Afghanistan, let alone Iraq - IF it had been properly directed WITHOUT invading Afghanistan and wasting time with the Taliban, who were irrelevant to the entire issue.

Morons.

Powell, Al, Mixner and the rest of these jerks simply get hard-ons from living in a country with a lot of nukes and military toys. Makes up for not getting enough plastic Army men when they were kids. Plus they're so scared of foreigners they might as well wear incontinence diapers 24x7.

mike--
I've been involved in military reform since before Gary Hart ran on it in the 80's. He's still got some great ideas on the subject, if anyone's listening.

It's NOT just a left-wing issue. There are a lot of weapons programs we've wasted kazillions on, and a lot of bases we don't need, etc.--for instance, we still have over 20,000 combat troops in South Korea, when most military experts agree we can now deter an invasion from the North more effectively with stand-off weapons, even if anyone thought the threat of an invasion was still real. These are things that undermine our effectiveness, and professionals from all political points of view are concerned about it.

But bottom line, most of the money goes to personnel, or as some say, "braces for the Staff Sergeant's kids." Currently Barak Obama is calling for an increase of 96,000 infantry troops, Army and Marines, which is something that should have been done in 2002, and is certainly going to be needed unless we really plan to abandon Iraq and Afghanistan--and I have seen no evidence that would cause me to think we will no matter who gets elected. But it won't be cheap, and we should be looking for offsets in many places.

I've always been pretty skeptical of the "two wars" scenario, which means for example having to resupply combat units in different parts of the world through hot LZ's or across the beach under fire, hardly the sort of problems we're currently facing. But it seems to me fundamentally unacceptable that our military should be sufficiently "broken" that we can't even support allied governments in their own countries.

Unless of course we go with the Pat Buchanan Doctrine, in which case we only need the Navy, the National Guard, and lots of concertina wire.

Re Chris Ford's comment "Obviously debunked when Napoleon's citizen Army made mincemeat of local militias, though Congress was slow to understand how pathetic our militias were until DC was burning thanks to 3,000 British Marines the ragtag militia could not stop - and regular Army Canadians under British command made our northern militias their 'lil bitches from Lake Erie to Maine. Buffalo burned and America militia rabble fled south past Albany.

Jackson's regular Indian-fighting forces, and the regular Navy, plus the concern of the French joining in finally stopped the British bitch-slapping and transformed the militias into functional arms of the US Army. 30 years. Not 160."
-----------
1) Again, Chris shows why it's a mistake to let Corporals in the Regular Army get into making military policy -- although the German General Staff could have told us that.

2) The US Army's OWN "American Military History" notes that American militias were the decisive factor in the American Revolution -- at Bennington, King's Mountain, Cowpens, and Guildford Courthouse . They made up roughly a third of the force at Yorktown.

3) In the War of 1812, Chris misses the obvious point: if a foreign invader wants to come in and burn Washington DC to the ground, why should the common US citizen try to stop them?

When the British expedition moved on to Baltimore, on the other hand, it got its ass kicked and its commander exterminated. At that same time, my ancestor in the mountains of North Carolina was mobilizing with his militia and moving toward Norfolk. The British expedition pulled out just before it could be surrounded and destroyed.

4) Chris Ford's comment about Andrew Jackson being supported by the French and "regular Navy" is a crock. The Navy's support consisted of a small ship on the Mississippi which was sunk quickly. The "French" were NOT French Regulars -- they were FRENCH PIRATES under Jean Lafite who manned the cannons on Jackson's right flank.

The small unit of Marines on the center weren't even involved in the battle -- because the British main effort was a human wave attack on Jackson's left flank.

There, rotating ranks of Tennesee and Kentucky MILITIA kept up volleys of riflefire that started killing British Regulars from 200 yards out-- as shown on maps left to us by Jackson's engineer.

5) Those MILITIA EXTERMINATED close to what? -- 8000 British Regulars -- who previously had kicked Napoleon's ass and the ass of Chris Ford's much vaunted "Napoleonic Regulars". That MILITIA sent Wellington's son-in-law (Commander of the British Force) home in a rum barrel (done to keep the corpse from rotting.)

6) The American citizens of today are ignorant of our history and do not appreciate the value of what that militia accomplished.
The Battle of New Orleans was a MAJOR event for the USA -- whosoever controlled New Orleans controlled the watershed of the Mississippi River. IF the BRitish controlled it, then states west of Appalachian Mountains would have broken away from the fledging USA and allied with Britain. They would have had NO choice -- they had not other way to sell and buy with the rest of the world other than via New Orleans.

Westward expansion would have stopped, Spain would have taken the West Coast and the North American continent would have had at least three major nations engaged in perpetual competition and war.

As in Europe, republican government would have disappeared --due to the need for strong leaders in wartime -- and the Constitution would have been replaced by a monarchy.

7) Although the MILITIAS exterminated the British REGULARS at New Orleans with the loss of only 12? men, that was not the total bill.

In the months to come, hundreds of militiamen on Jackson's left flank would die from Yellow Fever -- contracted from the swamp they slept in to keep the Brits from turning Jackson's flank.

Those men gave their lives to ensure this country continued -- they deserve more than the sneers of an asshole like Chris Ford.

And St. Obama wants to increase military spending even more.


Comments closed March 09, 2008.

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