Mises Wire

Trump’s Big Defense-Spending Plans Aren’t Enough for this Beltway Think Tank

Earlier this month, SIPRI (Stockholm International Peace Research Institute) which monitors global military spending, released its latest report. To no one’s surprise, the US topped the list, with more spending than the next seven biggest spenders combined. 

According to the report, in 2017 the US spent 610 billion dollars, while China spent 228 billion. The rest of the list engaged in miniscule amounts of spending by comparison, with Russia spending 66 billion, the UK spending 47 billion, and Japan spending 45 billion — to list a few examples. 


Source: SIPRI, totals are in billions of dollars.

Also notable was the fact that Russia fell from third place to fourth place among the biggest spenders. This occurred due to both a decline in Russian spending and an increase in Saudi spending. According to SIPRI:

Military expenditure by the USA was unchanged in 2017, at $610 billion. China increased its military spending by 5.6 per cent, Saudi Arabia by 9.2 per cent and India by 5.5 per cent, while Russia’s spending fell by 20 per cent.

Both Russia and the US both continue to far exceed all other states in terms of nuclear stockpiles. Moreover, even with rising Chinese spending, the ability of the US to deploy nuclear arms far exceeds that of anything the Chinese have to offer.


Source: Federation of American Scientists.

Viewed in light of the deterrent power of the US’s enormous nuclear stockpile, US military capability is far greater than even the SIPRI report suggests. 

Nevertheless, there are some in Washington who every year cry wolf over how the US military is being stripped to the bone, and that the US must “rebuild” its military capability. 

On Wednesday, the American Enterprise Institute (AEI) released a new report claiming the US government is on a path toward “underfunding” the “national defense strategy.”

This is to be expected from AEI, of course, which has long assumed a very aggressive and military posture on defense matters. 

This time around, the AEI is complaining that unless the Trump administration more forcefully demands greater military spending, it “will flatline in 2020” and the result will be an “underresourcing” of capacity.

Althought the AEI report attempts to portray military spending as austere, more ordinary people — i.e., the ones who actually pay the bills — might look at the military budget and see that the proposed military spending in 2018 is one of the largest totals ever.

Indeed, when adjusted for inflation, 2017 spending on the Department of Defense was higher than what it was during the Reagan buildup of the 1980s. The proposed 2018 budget will be 20 billion above that. 


Source: Office of Management and Budget, Table 4.1, Outlays by Agency

However, as Robert Higgs has pointed out, Pentagon spending is only part of what taxpayers are shelling out for “defense.” Higgs notes, for example, that the nuclear arsenal is largely paid for through the Department of Energy, and these budgets also never include the interest that must be paid on past deficits incurred to fund military spending. 

For the sake of simplicity, however, we’ll look at only Homeland Security Spending, Veterans Administration Spending, and Defense Department spending. VA spending, after all, is nothing more than deferred personnel spending that is essential to the Defense Department’s recruiting and retention efforts. It’s not distinct from military spending. DHS spending, meanwhile, is a convenient way to militarize local police forces and increase federal police powers on the domestic front in spite of restraints placed on the military by the Posse Comitatus Act. 

So, if we combine these three departments, we find that military spending is well above what it was in the Cold War days:


Source: Office of Management and Budget, Table 4.1, Outlays by Agency

Combined, this spending is expected to reach $840 billion in 2018.

None of this is to say that Reagan’s enormous military buildup represented the “correct” amount of military spending. As Richard Ebeling of The Citadel Military College has noted, we have no non-arbitrary measure of defense spending.

Ebeling writes

But is any government-chosen amount and type of national defense and homeland security worth it? We don’t know. In a free market economy, there is two-sided competition. Demanders must decide how much they are willing to bid and pay to purchase desired goods in competition with other buyers also interested in purchasing them. Suppliers judge what monetary costs they might be willing to incur to bring certain types and amounts of goods to market, in competition with other supply-side rivals also interested in purchasing or hiring some of the scarce resources, capital and labor services, based on what they estimate willing demanders might pay when the various goods they produce are ready to be offered on the market.

But with a “public good” such as national defense or homeland security, it is a group of politicians, bureaucrats, and private sector special interest groups interested in getting government contracts or indirectly benefiting from such government spending who interactively decide how much and what type of national defense and homeland security will be provided at taxpayers’ expense. They are the joint “central planners” deciding on the quantity and forms of such “public goods.”

It is not the actual citizens of the society demonstrating their preferences and valuational judgments about the amount and types of these “public goods” they think are needed and worth it by choosing how much they want to spent for types and combinations of defense and security. There is no way, therefore, to be certain or to calculate how much defense and “security” are desired and reflective of the citizenry’s values and preferences since they do not “vote” for them in the same way that they do as everyday market participants. In the marketplace, we “vote” with our voluntarily spent dollars, with each of us choosing the types and combinations of the goods and services that serve our ends and purposes, even when this differs noticeably from the market choices of many others in society.

Nor does the military itself even know what it does with the money it gets. It ought not be forgotten that the Army was found to have fudged the numbers on trillions of dollars of spending. Reuters reported in 2016 that “the Defense Department falsified accounting on a large scale as it scrambled to close its books. As a result, there has been no way to know how the Defense Department – far and away the biggest chunk of Congress’ annual budget – spends the public’s money.”

For this reason, it’s not surprising that the AEI report can’t point to any objective measure of defense spending. Instead the report makes a number of claims about troop totals and past budgets. It slices and dices the data to make it look as if the military is withering away. 

But just as a navy’s value is not measured in the number of boats it has, neither is a military force’s value measured in the number of personnel. Nor is it anything but arbitrary to claim that “last year’s amount was X, so the correct amount this year must be X plus 50 billion.” 

Moreover, it’s important to note that a big difference between budget cutters and big-spenders is that it’s the pro-spending faction that’s asking for more spending, bigger deficits, and ever greater military expansionism around the globe. 

Thus, the burden of proof is on them to make their case. 

And they’re trying to make the case furiously, hoping no one will notice the US is off the charts in terms of global military spending. Unfortunately, I suspect they’ll succeed.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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