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The Military Imbalance: How The U.S. Outspends The World

Posted by Winslow Wheeler on

A telling graphic from the International Institute for Strategic Studies’s newly released report on global military spending (click here for the original).

The International Institute for Strategic Studies (IISS) has released its annual series of reports on international defense spending, The Military Balance 2012. The full text is subscriber-only, but a summary press release, detailed table of contents, and a very useful overview of one of the more interesting volumes, “Comparative Defence Statistics,” are free online. The content of the comparative volume is important; it gives a view of the gigantic girth of the American defense budget.

First, however, to better appreciate what these figures reveal about the huge size of the US defense budget, a short discussion is needed about the caveats that some articulate to adjust the optics of the spending comparisons.

Some point out that the IISS numbers for the Chinese and Russian defense budgets do not include all their defense related spending. That is correct. For example, for 2010 the official Chinese defense budget is shown as the equivalent of $78.7 billion in US dollars, but if foreign arms purchases, R&D and other defense related spending is included, the amount is re-estimated at $111.1 billion. IISS also introduces a concept called “purchasing power parity” (PPP) to attempt to equalize the value of a dollar of spending in each country; the PPP version of the 2010 Chinese defense budget is $178.0 billion.

But there are some very important caveats to these caveats.

Just as the official Chinese and Russian defense budgets are incomplete, so is the US defense budget. The IISS does count the US spending outside the Pentagon’s nominal budget, such as for nuclear weapons, the Selective Service, and other defense related spending in what the Office of Management and Budget calls the “National Defense” budget function. However, the IISS does not count other US defense related spending. For 2011, this includes roughly $20 billion in military retirement spending outlayed by the Treasury Department (the DOD budget pays for less than half of annual military retirement costs). IISS does not count military aid to countries like Israel and Pakistan (in the International Affairs budget). It also does not count various homeland defense costs in the Department of Homeland Security (such as Customs and Border Patrol and the Coast Guard). It does not count the costs of caring for veterans of past and current wars in the Department of Veterans Affairs. Adding in all of these non-DOD agencies’ costs, plus a share of the annual interest on the national debt, can get total US defense-related spending up to about $1 trillion, rather than the $739.3 billion the IISS counts for the US for 2011. (The IISS version of the US defense budget for 2011 is further complicated by the fact that IISS counts the original Obama request for 2011, $739.3 billion, not the $717.4 billion that has actually been appropriated, but $20 billion is a minor error in such gigantic calculations).

In short, the IISS does not count all Chinese, Russian, or American defense spending. To achieve a complete and accurate apples to apples count would require more analysis than IISS has performed. To count all such spending for all such countries may, or may not, mean counting all of the items that total the US national security budget to about $1 trillion; it would depend on the methodology. The use of only each government’s officially counted defense budget undercounts the numbers, but it does so for each. How the relationships might change, especially the ratio by which the US budget exceeds the others, is unknown pending a better apples to apples comparison by IISS or others, but at first glance it does not appear that the ratio of US spending levels would be significantly disadvantaged.

The IISS estimate for the Chinese and Russian defense budgets is also affected by the “PPP” (Purchasing Power Parity) analysis, an effort to equalize various economic and other analytical factors. The effect of the PPP is large, larger than the effect of attempting to count all defense-related spending. For example, the official Chinese defense budget for 2010 grows from $78.7 billion to $111.0 billion when one includes all known defense spending, but that number grows much more, to $178.0 billion, in the PPP analysis. (I find no PPP analysis for China’s 2011 numbers.)

The PPP analysis, however, should be treated with care. Part of that caution is expressed by IISS itself. In its printed volumes, IISS states: “The use of PPP rates is a valid tool when comparing macroeconomic data, such as GDP, between countries at different stages of development. However, no specific PPP rate exists for the military sector, and its use for this purpose should be treated with caution. Furthermore, there is no definitive guide as to which elements of military spending should be calculated using the limited PPP rates available.” It is presumably for this reason that in its “Comparative Defence Statistics” analysis, IISS does not employ the PPP factor for comparing defense budgets across countries.

The PPP comparison also reminds one of a bizarre analytical technique the Cold War era intelligence community used when comparing US defense spending to that of the Soviet Union. To size the overall Soviet defense budget, an assumption was made, for example, to cost Soviet tanks, such as the T-72, as the cost equivalent of American tanks, such as the M-1, notwithstanding the fact that the American tank was far more complex and therefore much more expensive than the T-72. Thus, with the Soviets producing tanks in greater numbers than the US, the Soviet defense budget was counted as far larger than it actually was. It was threat inflation masked behind contrived budget analysis, and it was quite notorious to all, except those who welcomed the budget/threat inflation for bureaucratic or political reasons. The IISS description of its PPP analysis talks about adjusting for the cost of labor and materials in different countries and hints of an analytical technique vaguely like this discredited Cold War method; so the IISS admonition that its own PPP analysis “should be treated with caution” for the purpose of comparing military spending is an admonition that should be respected. If IISS did not use it for its comparative analysis, it seems reasonable for others to avoid it as well.

All that said, what do the IISS numbers show?

The first figure compares officially reported (and incomplete) US defense spending for 2011 ($739.3 billion) to the rest of the top ten defense spenders (also as officially reported): They are China, the UK, France, Japan, Russia, Saudi Arabia, Germany, India and Brazil–in that order. See the budget numbers at the link: note that not one breaks the $100 billion threshold, let alone coming anywhere close to the US. Added all together, the nine come to roughly two-thirds of the US amount, showing not balance but imbalance.

However, the contraposition of US spending to these nine is a bit odd; it suggests there is some sort of analytical comparison to be made between the US and these nine countries, other than that they are the next nine in spending levels. It would make more sense to compare US spending to that of opponents, or at least potential opponents. Assuming for the moment that China and Russia are “potential opponents” (an assumption often made by Cold Warriors with a hangover or others with no great respect for the ability of US policy makers to learn to live with regional powers or even a future superpower), the combined total for China ($89.8 billion) and Russia ($52.7 billion) comes to $142.5 billion.

Consider how puny that $142.5 billion is compared to the US’s $739.3 billion. Showing that relationship in a bar graph would almost seem to be a conscious act in diminishing China and Russia or bloating US spending. That, nonetheless, is the appropriate comparison. Moreover, adjusting it for the defense budgets of Syria, Iran, North Korea, Somalia or anyone else won’t change a thing. Not one of the latter breaks the $10 billion barrier, and if you add the defense related spending not officially reported (including for the US), the basic relationship in these spending totals will not likely change: The US spends roughly five times what these other countries spend.

In other words, the US defense budget is not just dominant; it is operating at a level completely independent of the perceived threat. In the nineteenth century, the Royal Navy sized itself to the fleets of Britain’s two most powerful potential enemies; America’s defense budget strategists declare it will be “doomsday” if we size to anything less than five times China and Russia combined.

The last figure, “Planned Defence Expenditure by Country 2011,” shows the proportion of US spending to all other regions and countries. The US accounts for 45.7 percent of total spending by the world’s 171 governments and territories. While, again, there is no comparison of the US and our allies vis-à-vis all of our “potential opponents,” the comparison becomes so unbalanced as to be odious. With most of the top ten on “our” side, the ratio of “us” to “them” is far more than five to one and more like ten, or more, to one – even assuming many governments are neutral.

As the Republicans argue in the coming (election) year that Obama is “cutting” defense to “dangerous” levels, and as Obama’s Secretary of Defense moans about “doomsday” to occur if existing spending is reduced below current plans, consider the numbers above. Do these people know what they are talking about? Do they want you to know?

What do you think?