Defense Spending Is Much Greater than You Think
By Robert Higgs • Saturday April 17, 2010 2:50 PM PDT • 80 Comments
When President Obama presented his budget recently for fiscal year 2011, he proposed that the Pentagon’s outlays be increased by about 4.5 percent beyond its estimated outlays in fiscal 2010, to a total of almost $719 billion. Although many Americans regard this enormous sum as excessive, few appreciate that the total amount of all defense-related spending greatly exceeds the amount budgeted for the Department of Defense.
In fiscal year 2009, which ended last September, the Pentagon spent $636.5 billion. Lodged elsewhere in the budget, however, other lines identify funding that serves defense purposes just as surely as—sometimes even more surely than—the money allocated to the Department of Defense. On occasion, commentators take note of some of these additional defense-related budget items, such as the Department of Energy’s nuclear-weapons program, but many such items, including some extremely large ones, remain generally unrecognized.
Since the creation of the Department of Homeland Security, many observers probably would agree that its budget ought to be included in any complete accounting of defense costs. After all, the homeland is what most of us want the government to defend in the first place.
Other agencies also spend money in pursuit of homeland security. The Justice Department, for example, includes the Federal Bureau of Investigation, which devotes substantial resources to an anti-terrorist program. The Department of the Treasury claims to have “worked closely with the Departments of State and Justice and the intelligence community to disrupt targets related to al Qaeda, Hizballah, Jemaah Islamiyah, as well as to disrupt state sponsorship of terror.”
Much, if not all, of the budget for the Department of State and for international assistance programs ought to be classified as defense-related, too. In this case, the money serves to buy off potential enemies and to reward friendly governments who assist U.S. efforts to abate perceived threats. About $5 billion of annual U.S. foreign aid currently takes the form of “foreign military financing,” and even funds placed under the rubric of economic development may serve defense-related purposes indirectly. Money is fungible, and the receipt of foreign assistance for economic-development projects allows allied governments to divert other funds to police, intelligence, and military purposes.
Two big budget items represent the current cost of defense goods and services obtained in the past. The Department of Veterans Affairs, which is authorized to spend about $124 billion in the current fiscal year, falls in this category. Likewise, a great deal of the government’s interest expense on publicly held debt represents the current cost of defense outlays financed in the past by borrowing from the public.
To estimate the size of the entire de facto defense budget, I gathered data for fiscal 2009, the most recently completed fiscal year, for which data on actual outlays are now available. In that year, the Department of Defense itself spent $636.5 billion. Defense-related parts of the Department of Energy budget added $16.7 billion. The Department of Homeland Security spent $51.7 billion. The Department of State and international assistance programs laid out $36.3 billion for activities arguably related to defense purposes either directly or indirectly. The Department of Veterans Affairs had outlays of $95.5 billion. The Department of the Treasury, which funds the lion’s share of military retirement costs through its support of the little-known Military Retirement Fund, added $54.9 billion. A large part of the National Aeronautics and Space Administration’s outlays ought to be regarded as defense-related, if only indirectly so. When all of these other parts of the budget are added to the budget for the Pentagon itself, they increase the fiscal 2009 total by nearly half again, to $901.5 billion.
Finding out how much of the government’s net interest payments on the publicly held national debt ought to be attributed to past debt-funded defense spending requires a considerable amount of calculation. I added up all past deficits (minus surpluses) since 1916 (when the debt was nearly zero), prorated according to each year’s ratio of narrowly defined national security spending—military, veterans, and international affairs—to total federal spending, expressing everything in dollars of constant purchasing power. This sum is equal to 67.6 percent of the value of the national debt held by the public at the end of 2009. Therefore, I attribute that same percentage of the government’s net interest outlays in that year to past debt-financed defense spending. The total amount so attributed comes to $126.3 billion.
Adding this interest component to the previous all-agency total, the grand total comes to $1,027.8 billion, which is 61.5 percent greater than the Pentagon’s outlays alone.
In similar analyses I conducted previously for fiscal 2002 and for fiscal 2006, total defense-related spending was even greater relative to Pentagon spending alone – it was 73 percent greater in fiscal 2002 and 87 percent greater in fiscal 2006. In fiscal 2009, the ratio was held down in large part by the reduced cost of servicing the government’s debt, owing to the extremely low interest rates that prevailed on government securities. This situation cannot last much longer. As interest rates on the Treasury’s securities rise, so will the government’s cost of servicing the debt attributable to past debt-financed defense outlays.
For fiscal 2010, which is still in progress, the president’s budget estimates that the Pentagon’s spending will run more than $50 billion above the previous year’s total. Any supplemental appropriations made before September 30 will push the total for fiscal 2010 even farther above the trillion-dollar mark.
Although I have arrived at my conclusions honestly and carefully, I may have left out items that should have been included—the federal budget is a gargantuan, complex, and confusing collection of documents. If I have done so, however, the left-out items are not likely to be relatively large ones. (I have deliberately ignored some minor items, such as outlays for the Selective Service System, the National Defense Stockpile, and the anti-terrorist activities conducted by the FBI and the Treasury.
For now, however, the conclusion seems inescapable: the government is currently spending at a rate well in excess of $1 trillion per year for all defense-related purposes. Owing to the financial debacle and the ongoing recession, millions are out of work, millions are losing their homes, and private earnings remain well below their previous peak, but in the military-industrial complex, the gravy train speeds along the track faster and faster.
| National Security Outlays in Fiscal Year 2009 (billions of dollars) |
|
| Department of Defense | 636.5 |
| Department of Energy (nuclear weapons & environ. cleanup) | 16.7 |
| Department of State (plus intern. assistance) | 36.3 |
| Department of Veterans Affairs | 95.5 |
| Department of Homeland Security | 51.7 |
| Department of the Treasury (for Military Retirement Fund) | 54.9 |
| National Aeronautics & Space Administration (1/2 of total) | 9.6 |
| Net interest attributable to past debt-financed defense outlays | 126.3 |
| Total | 1,027.5 |
| Source: Author’s classifications and calculations; basic data from U.S. Office of Management and Budget, Budget of the United States Government, Fiscal Year 2011 and U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970. | |
Tags: Budget and Tax Policy, Economics, Military, The State, War, Weapons 
Thanks Dr. Higgs! I was just trying to argue this with a person the other day but I didn’t have the actual numbers. Now I do. Very few people understand the price we pay both monetarily and socially in keeping the massive warfare state afloat. Just the other day Obama was making the same old tired argument about the need for the U.S. to continue in it’s role as superpower and policemen of the world.
Rick
RickC | Apr 17, 2010 | Reply
Hi, Robert. Interesting but I think you are pushing it a bit. Your attributing 1/2 of the NASA budget to military research seems gratuitous or a guess proceeding from pacifist bias. Your argument that the whole State Department budget belongs in defense is spurious. If we doubled military expenditures, narrowly defined, and then turned all such monies over to the State Department, would you then argue that American military outlays have grown tremendously (implying imperialism or adventurism, of course)? Including benefits earned in the past by military personnel is legitimate from a macro-historical accounting viewpoint but it’s misleading for many of your disciples. Some, many, most, will confuse this quantity with current military expenditures. Excluding benefits and using 2008 GDP as a base (a reasonable guess for what the 2010 GDP will turn out to be), I find that you are stating the following: For 2010, current military expenditures will be just under 6% of GDP. The eminent scholar Delacroix argues that I am overstating the case by including NASA and State Department outlays. (OK, you did not utter the last sentence but you should do it.)
Jacques Delacroix | Apr 17, 2010 | Reply
The military, corporate, social indoctrination complex. In a word, fascism.
Randy | Apr 18, 2010 | Reply
So does this mean that most of our defense outlays are spent on domestic use?
The_Orlonater | Apr 18, 2010 | Reply
We need to note that the world has changed and war is no longer profitable for either the aggressor or the defender. When the source of wealth was land based or resource based, war made economic sense — if you won. Now with wealth created by creativity and innovation, you can’t capture that value with armed forces.
With only half of the trillion dollars were are spending on our defense bureaucracy we could cut our our oil consumption by a few million bbl of oil per day every year. (capital cost trade-off on oil is about 100-200 billion of solar/wind/nuclear = a million BBL/day of oil equivalent). In less than a decade, we could become independent of oil and could tell the middle east to go pound sand.
If it wasn’t for oil, we wouldn’t care any more about the middle east that we do about Rwanda. If we could cause crude oil to become as significant to our economy as whale oil has become, our defense spending could decrease to almost zero.
To get started, we just need a revenue neutral (removal of a nasty destructive tax like payroll taxes) oil tax of $100/bbl and let our society innovate.
Dallas | Apr 18, 2010 | Reply
“Where Your Taxes Go,” by Dave Lindorff, appears in Counterpunch, 4/13/10. We have a war-economy.
richard | Apr 18, 2010 | Reply
That’s quite a hefty bill. But I don’t see the budget for the CIA, the Defense Intelligence Agency, the NSA and various other covert and intel departments. I suspect that would be another pretty penny on top of the trillion plus Dr. Higgs has discussed.
Lysander | Apr 18, 2010 | Reply
Consider the employment effect of all that domestic spending on war. If the clowns running the government were buying swimming pools instead of bombs, planes, and ships then a huge percentage of domestic jobs would depend on creating piles of swimming pools somewhere. These are jobs that are the equivalent of paying Alan to dig a ditch and Bruce to fill it, taxing Alan, Bruce, and a dozen of their relatives to cover Alan’s and Bruce’s paychecks (since neither Alan nor Bruce produces anything that actually adds value anywhere). When the shortfall of actual productivity is finally recognized then the vast branch of economic “activity” represented by the MIC will wither and die, dumping 10′s of millions onto the unemployment lines. Military Keynesianism at its best.
David C. | Apr 19, 2010 | Reply
Be conservative and round to $2 trillion for 2011 and that might be close.
Our gov’t lies in so many ways.
beacon | Apr 19, 2010 | Reply
According to here, at the very bottom is the total tax receipts broken out by year and type. The individual income tax in 2009 provided 1,044 billion dollars, a bare smidge above what you calculate to be the total “defense” cost for the same year.
In other words, without the 16th Amendment, it is impossible for the federal government to finance its “foreign adventures”.
Rob Kinyon | Apr 19, 2010 | Reply
Imagine if you had to spend half your budget on security...it would not leave much money for anything else...now imagine this on a national scale. You can see why our infrastructure, schools, etc., are in such poor condition...we are defending ourselves into poverty.
gary | Apr 19, 2010 | Reply
Oh I am quite sure we could find quite a bit more of money being spent but as usual the sacred cow of all our sacred cows our University systems, is left out of the equations.
Every year we hear of an Educational Budget that funds not one student but is made up of Research grants.
Not one student that is unless they are within one of the many military, pharma or agricultural research programs.
In 2006 it was some 80+ billion with more than one University receiving more than 1 billion for its many military research programs, some of which have been ongoing for years.
The University Administration is allowed to keep some 10 to 15% of total as administrative cost, administrative cost that some of which goes to their own team of experts, experts on applying for even more grants.
In more than one major University the numbers of students in the upper reaches of military science research is so heavy that it actually limits the amounts of students university can accept.
They also find it much more financially rewarding as government helps pay for those underclassmen’s education; while at same time the pay of many a part time senior educator who spends more time advising upon government and industrial concerns in preparations for their next book or paper to be written.
let alone as in hiring those ex military into their curriculum as advisors to senior administrators upon their retirement or as heads of those very same research facilities.
Today with the CIA financing classes with degrees in over 22 colleges so too must that funding be classified as military spending.
Under separate grants are schools in lower grades now being run by military, all under Education.
We have black ops and military bases blacker than they that only a very few know , if even they do, what the cost of them is as they are not under the rules and classified as non budget items.
National Security don’t you know.
Hide Behind | Apr 19, 2010 | Reply
Wow, that’s like 2.75 BILLION each and every day. And, though I may have missed it, it looks like this doesn’t even include the “Special Appropriations” or whatever it is that they call war spending.
Al Dove | Apr 19, 2010 | Reply
You aint seen nothin yet!! Wait till the neocons push us into Iran.
RT Carpenter | Apr 19, 2010 | Reply
Americans are no safer nor are they secure either. They are spending themselves into oblivion.
Giving up their freedom/rights are not the route they should pursue. Canadians are no better in this regard.
There are too many fear/hate mongers in America as well as war criminnals/war mongers that support the War Machine.
There is no difference between Democrats and Republicans as American foreign policy vis-a-vis Israel remains the same.
Read The Controversy of Zion by Douglas Reed (available online).
Read Encyclopedia of the Palestine Problem by Issa Nakheleh (also available online).
Read The Israel Lobby by Mearsheimer and Walt.
Read Palestine: Peace not Apartheid by Jimmy Carter.
Read The New Babylon by Michael Collins Piper.
Draw your own conclusions.
DR | Apr 19, 2010 | Reply
We have so much history to learn from regarding the perils of funding wars over funding the basic needs of the people. Can anyone recall even one country that has succeeded in funding both the needs of the people and the cash outflow needs of constant war? Basically, the USA is bound to suffer the same fate as it’s predecessor warfare states. And that’s a good outcome. Our country is still a living, breathing experiment that has a solid constitution to rely on. Perhaps this latest militiarized rush toward financial implosion is a necessary step forward in our species’ long march toward socialized enlightenment?
Tim O | Apr 19, 2010 | Reply
Dr. Higgs and Beacon staff, It’s quite obvious that this administration can do anything it wants to with or without the democratic process of opposition. This is the administration that will totally change the face of american politics as we once knew it. Obama and his banker thugs have every avenue of dissent covered to the detriment of the citizens of this former great nation. Put also the blame on the government controlled media that works in concert with the edicts of Washington that floods their viewers with sex, commercials, Hollywood trash along with nonsensical sit coms that have no social redeeming factors to the betterment of society, anything but the truth of what is taking place across the nation.
During the next three years of his term Obama will introduce indelible new bills and executive orders with the blessings of the Supreme Court that the next administration will be unable to alter or change. The introduction of these life altering regulations will eventually eliminate all of our freedoms and liberties that we now hold sacred.
There will be pockets of resistance from the patriots but not to the level of any threat to this tyrannical criminal regime. Not only are we going to be taxed to death but also the introduction of culling the elderly from society under the Obamacare health program. If you can’t see what is happening to our country by now you never will.
Jim Haynes | Apr 20, 2010 | Reply
Excellent analysis and subsequent comments. We need a similar analysis pertaining to domestic spending, breaking out that which is legitimate under the original meaning of the Constitution from that which is not. By combining the two we could establish a “model budget” sufficient to fulfill the Constitutional functions of government and use it to show the electorate how out-of-control the political class of America is. Ordinary Americans are waking up to the perils of power but they need a viable model of Constitutional governance as an objective. Right now they see no alternative to fascism.
Richard | Apr 24, 2010 | Reply
Hubris much?
Novista | Apr 24, 2010 | Reply
Excellent analysis. We need a similar analysis pertaining to domestic spending, breaking out that which is legitimate under the original meaning of the Constitution from that which is not. By combining what would be legitimate in both military and domestic arenas, we could establish a “model budget” sufficient to fulfill the constitutional functions of government and use it as a counterpoint to what is actually being spent. Ordinary Americans are waking up to the perils of power but no longer even know what a constitutional government of limited powers would look like. They need a viable model of constitutional governance as a guide. Right now they are endlessly taught that the limitations on government established by the Constitution are inherently infeasible and irrelevant and they see no alternative to the present fascism. If this type of conversation remains primarily within academic circles, it is continued fascism that we will have.
Richard | Apr 24, 2010 | Reply
I agree with the comment on State Dept. budget—too much attributed to war. But you have missed the CIA and the budget for the other 15 spy agencies; between $60-80 Billion. Also the 2011 budget for V.A. is much more than yours; $120 Billion. Plus $47 Billion for veteran home loans (not sure which side of the ledger this belongs).
felix pryor | Apr 26, 2010 | Reply
War is a public-works project (albeit one that provides very special opportunities for asserting affirmative control over the populace). “Defense” is one, too, and almost as good on those other scores.
The basis for all this is swallowing government lies – and caving in to the reward/punishment system that grows more-potent with each movement (popular or covert) of anything (GM, education, social justice) from the private “sector” to the government.
The black hole of government is about to swallow the last thing(s) it hasn’t swallowed yet.
N. Joseph Potts | Apr 26, 2010 | Reply
The use of the GDP to compare this is misleading but typical of right-wing rhetoric. Only if every transaction was taxed by the federal government would GDP be relevant. Since this does not occur, there is no comparison. Obviously the only thing that matters is how much of your income is your house payment, not how much does everyone in your neighborhood spend. Additionally, it should be noted that when money is spent repairing and/or burying soldiers, the GDP goes up. The bigger the lie, the more people will believe it.
Tim Kelly | Jan 5, 2011 | Reply
There is a cost that is so overlooked even though it is the biggest elephant in civilization’s room.
Weapons and war are the greatest polluters invented by man. I don’t think you could even begin to come up with a close estimate of damage to the planet, unless maybe it is life itself.
carol | Jan 5, 2011 | Reply
Can anybody explain to a naive European living, how come there is no outcry in your country against this suicidal policy, that a Tea Party movement exists, that Republicans have the majority again in Congress, that tax cuts for the very rich have been prolonged, that Wall Street continues to burn your wealth...
As far as I know, you have the right to vote. No?
Frank | Jan 6, 2011 | Reply
It’s the global mess!
Terrorism, global
warming, and problems,
etc. Awaken and act!
rosan | Jan 8, 2011 | Reply