June 11, 2010

WITH THE LONG WAR NEARLY OVER...:

Sen. Coburn Tackles Runaway Defense Spending (Josh Barro, 6/08/10, Real Clear Markets)

The largest driver of the long-term federal budget gap is entitlement spending that is slated to grow faster than the economy. But a second key driver -- growth in security spending -- often gets short shrift. That national security is important does not mean that the Pentagon should be exempt from fiscal oversight or off the table when we talk about balancing the federal budget. This is especially true because higher defense spending does not always make us safer.

From the end of the Vietnam War through the end of the Cold War, national defense spending typically ran between 5% and 6% of GDP. With the Soviet threat eliminated, the "Peace Dividend" allowed a reduction in defense spending as a share of the economy, bottoming out at 3% of GDP in 1999 and 2000. This restraint was one of the key drivers of the budget surpluses of the Clinton-Gingrich era.

But since the September 11 attacks, the trend has reversed. In 2010, defense spending will again reach 4.9% of GDP, the same level as in 1980. About half of this increase has been driven by specific costs of the wars in Iraq and Afghanistan, and the rest by growth in base military spending faster than economic growth. With deficits expected to run in the range of 4% of GDP over the next decade, a 2% of GDP rise in defense spending is a huge deal.


...there's no reason not to get it down to a normal peacetime 1-2%.

Posted by Orrin Judd at June 11, 2010 5:23 AM
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