Defense Spending over Time

Real defense spending is higher than at the Reagan buildup, but is (much) lower as a ratio of real GDP.

Figure 1: Defense spending in billions Ch.2012$ SAAR, on log scale (blue, left scale), and as a log ratio to GDP (tan, right scale). NBER defined peak-to-trough recession dates shaded gray. Source: BEA 2023Q2 advance release, NBER, and author’s calculations.

57 thoughts on “Defense Spending over Time”

  1. pgl

    Defense spending fell after the end of Vietnam but St. Reagan changed all that. Of course we did have that peace dividend in the 1990’s (something JohnH denied) but W changed all of that. Defense spending was coming down under Obama but Trump changed all of that.

    Message? If you want to reduce defense spending stop voting for Republicans.

    1. Anonymous

      i was there,

      the quality of toilet paper in the latrines declined in summer 1973.

      and they began to give lectures about alcoholism!

      vietnam peace dividends!

      yossarian is everyman!

    2. ltr

      “Message? If you want to reduce defense spending stop voting for Republicans.”

      This is importantly incorrect. Congress sets defense spending and the Senate and/or House have/has often been controlled by Democrats when real defense spending has increased:

      https://fred.stlouisfed.org/graph/?g=pMdl

      January 15, 2018

      National Defense Consumption Expenditures & Gross Investment / Consumer Price Index, 1948-2023

      (Indexed to 1948)

      1. Macroduck

        This is importantly incorrect. The president proposes, Congress disposes. There is good evidence that presidential spending recommendations influence spending levels. Ignore that and you ignore reality.

        1. pgl

          ltr points to the Korean War? I guess she wants the PRC to take over South Korea. And anyone who knows US history knows the Vietnam mistakes started under Eisenhower.

          1. ltr

            — points to the Korean War? I guess she wants the PRC to take over South Korea.
            — points to the Korean War? I guess she wants the PRC to take over South Korea.
            — points to the Korean War? I guess she wants the PRC to take over South Korea.

            [ Notice the nutty viciousness, over and over, and over. ]

        1. ltr

          So you are defending Trump now?
          So you are defending Trump now?
          So you are defending Trump now?

          [ Notice the need to intimidate, the nutty viciousness. ]

  3. Macroduck

    I often point out that Johnny simply makes stuff up, because he isn’t interested in the truth. Often, this lying habit takes the form of pretending that people lack information or hold views they don’t actually hold. Earlier today, I linked to an article about the possibility that the U.S. will turn to Mongolia as a source of raw materials. Johnny does his usual thing:

    JohnH

    August 1, 2023 at 1:38 pm

    Ducky just figured out one of the most important factors behind US overseas military interventions? And all this time he’s bought the BS that the US invades Iraq, Libya, and Afghanistan because of their deep commitment to human rights!?!…

    Johnny is a liar, but think about his motive for lying, when this is the kind of lie he tells. Johnny has neither the intelligence nor the knowledge to engage in actual debate, so he lies. He creates straw men. To Johnny, it doesn’t matter, because the people he works for don’t pay him for honest debate. They pay him to drive wedges and prevent discussion.

    1. JohnH

      Ducky has neither the intelligence nor the knowledge to engage in actual debate, so he avoids refuting my claims…in this case, the fact that most of the US military interventions have occurred in countries with extensive mineral resources–Iraq (oil), Libya (oil), Afghanistan (minerals), and now Ukraine.

      Apart from significant energy and agricultural potential, “Ukraine is also a potential superpower in the production of critical industrial metals. Ukraine has commercially relevant deposits of 117 of the 120 most-used industrial minerals across more than 8,700 surveyed deposits. Although total output was roughly $15 billion last year, the total value of deposits—including titanium, iron, neon, nickel, lithium, and other key resources—could reach between $3 trillion and as much as $11.5 trillion. Not surprisingly, many domestic and international companies have slowed or ceased mining activities in Ukraine since the onset of the war.” https://foreignpolicy.com/2022/04/28/ukraine-war-russia-resources-energy-oil-gas-commodities-agriculture/

      Sure, it probably motivated Russia’s invasion, it also had to have been a driver of NATO’s response.

      But Ducky wants you to believe that the US has only noble objectives (human rights,) while Russia’s are crass. IOW Ducky wants you to believe US propaganda and summarily dismisses any information that suggests that (as in Iraq, Libya, and Afghanistan), the US has the same crass motives as Russia.

      1. pgl

        “Ducky has neither the intelligence nor the knowledge to engage in actual debate, so he avoids refuting my claims”

        Seriously dude – you are the one who clearly lacks intelligence so you refuse in actual debate. Your garbage has been routinely rebutted by Macroduck, me, and many others. And what does little Jonny boy do then? He whines that the other kids are being mean.

      2. pgl

        “With the exception of agriculture and coal, many of Ukraine’s resources remained underdeveloped and unexplored during the Soviet and much of the post-Soviet era. More recently, Ukraine has sought to increase its economic and energy security by developing these resources and diversifying its exports away from Russia. It launched a major oil and gas privatization effort in 2013, but this was inte unching a new energy strategy in 2017 and accelerating the licensing of mineral extractions last year, Ukraine’s moves to develop its resources have once again been thwarted by Russia’s invasion—not least because many of Ukraine’s resources are in its eastern regions and underneath the Black Sea, which are now either controlled by or under attack from Russia. Ukraine’s formidable farming output has likewise been set back by Russia’s deliberate targeting of warehouses, farm equipment, and other agricultural assets. Russia has also occupied many of Ukraine’s ports, is blockading sea routes, and has sunk several cargo ships intending to ship Ukrainian grain to world markets.”

        Well we did not back in 2014 that Putin stole Crimea for the oil. We do know that Ukraine is the bread basket of Europe which Putin wants to steal as well. But the Russian masters before Ukraine got its independence never bothered to develop the mining sector? Hey Jonny boy – your Russian masters are incompetent.

    2. pgl

      WTF did Jonny’s comments have to do with Mongolia? Don’t ask him as Jonny hasn’t a clue.

      1. JohnH

        Ducky noted the possibility that the U.S. will turn to Mongolia as a source of raw materials. “Elon Musk’s SpaceX to launch satellite internet service in Mongolia: Report” https://www.hindustantimes.com/world-news/elon-musks-spacex-to-launch-satellite-internet-service-in-mongolia-report-101688712816285.html

        Think about it.

        Is Mongolia, which sits between Russia and China, really a commercially feasible supplier of raw materials for the US? Is Mongolia the most lucrative market for SpaceX? I seriously doubt it.

        But Mongolia is an ideal place for the US to muck around. Like Ukraine, it has tremendous mineral wealth. And SpaceX has provided internet service to Ukraine, hardly a lucrative market…unless paid for by the Pentagon, which has to see Mongolia as a highly strategic venue. It would love to have and ally right in China’s back yard, just as Ukraine sits right in Russia’s front yard.

        1. pgl

          Buy a globe moron. Mongolia is land locked. So we are not exactly going to use our Navy or our Army to invade Mongolia. But the PRC could. Now Putin cannot because his stupid invasion of Ukraine has decimated his army.

        2. pgl

          “Starlink has built a fast-growing network of more than 3,500 satellites in low-Earth orbit that can provide connectivity in remote areas.”

          No one with a brain could read this to be a military threat to the Mongolian people. Musk is giving internet service to them instead. Oh wait – he’s going to get them hooked on the Twitter which will destroy their will to defend themselves I guess. After all – you are the master at peddling the dumbest conspiracies of all time.

    3. Ivan

      Ukraine has demonstrated that the future of war is unmanned drones mass produced and disposable. That goes for air, land and sea warfare. However, it will take a long time before US moves into that fitter. The military industrial complex knows how to sell big shiny machines as protecting those little scared boys who vote for GOP politicians.

        2. Ivan

          Its both quantity and quality of drones. The drones from Iran are fairly easy to shoot down. They are slow, noisy and have no ability to evade detection. Not sure how real and how much for show the curbing is. It does have the potential to make things more difficult for Putin. For Xi the choice between being locked out of US markets (by a tough US President) and keeping Russias self-destructive war on Ukraine alive for another 6-12 months was not that hard. Even the Saudis understand that Russias losing this war is a matter of when, not whether.

    4. pgl

      Ahem – we see that Jonny boy is still chirping trash. Now mind you – I did read your link which NEVER mentioned the insane notion that the US would invade this land locked nation. But US investor could extract the economic rents from Mongolian mines via abusive transfer pricing. I have noted this issue many times but trust me – little Jonny boy never noticed because he is dumber than a rock. But for the adults here – let me assure everyone that responsible people are trying to assist the Mongolian government:

      https://www.igfmining.org/beps/news/mongolia-tax-administration-transfer-pricing-tax-assessment/

      I would issue a challenge to Jonny boy to read up on this important issue but we all know he would not bother and even if he did – he would never understand this issue.

    5. pgl

      A recent article in the Australian Financial Review:

      https://www.afr.com/companies/mining/rio-stands-ground-on-oyu-tolgoi-tax-take-20230312-p5cre3

      Rio Tinto and the Mongolian government are yet to thrash out a deal on taxes and other issues around the giant Oyu Tolgoi copper mine in which they are partners, despite a thaw in relations. Rio chief executive Jakob Stausholm confirmed on Monday that international arbitration proceedings in the long-running tax dispute between the Oyu Tolgoi partners had been put on hold pending talks aimed at finding a resolution. Mr Stausholm said Rio was hopeful of settling the tax dispute and other issues soon, but it took “two to tango”. He said Rio and the Mongolian government had been able to “move mountains” lately as Rio looks to unlock the true value of a $US15 billion ($22.5 billion) investment in Oyu Tolgoi. However, there is no end in sight to the mine relying on China for its power and on Russia for its key inputs, albeit at arms length through a network of Mongolian-based suppliers.

      Arm’s length? Funny term to use when that $228 million dispute between the Mongolian Tax Authority and the owners of Oyu Tolgoi has to do with the transfer price for the copper this mine exports and what is likely a related party Singapore marketing affiliate.

      Rio Tinto is not a US multinational – rather it is infamous UK multinational that the Australian Tax Office has gone after. Trust me on this one – this issue has NOTHING to do with the US military unless little Jonny boy thinks international tax lawyers work for the US Marines.

  4. Anonymous

    another chronological trend to ponder: the decline of pentagon spending as % of federal outlays. that declined from roughly 2/3 for defense prior to great society to 8 to 10% of outlays recently.

    a lot more going to social security, as well as great society.

    my observation from defense career started in 1972 to 2019, final 30 odd years in weapons development and acquisition: trillions for dominating weapon bought cost overruns, late deliveries, with weapons less suitable to war such as Ukraine.

    how the money is spent is important

    1. JohnH

      The real question is “why does the United States need to spend more on national defense than China, Russia, India, Saudi Arabia, United Kingdom, Germany, France, South Korea, Japan, and Ukraine — combined?”
      https://www.pgpf.org/chart-archive/0053_defense-comparison

      Just showing that a someone has been spending like a drunken sailor for decades is no way proves that he should continue to spend that way. For starters, why not demand that the Pentagon pass an audit? Why not demand cost-effective spending rather than boondoggles?

      And why not trade off Pentagon spending on waste and mismanagement for Medicare for All, CO2 reduction, better education, ending homelessness?

      1. Anonymous

        random observation:

        “the emperor has no clothes”*. explains some of the mindset.

        it is all about $$.

        dividends paid by lockheed are why f-35 is 100% overrun and late with no schedule for overcoming its defects.

        even though the design of most weapons tests are to prove the thing does not work to cut the program.

        f-35 shoul have been cancelled with future combat system in 2006! navy and air force are better at assuring dividends than us army!

        *easiest way to end a career is to say “the system don’t work”.

        1. JohnH

          Anonymous wrote: ““the emperor has no clothes”*. explains some of the mindset…
          it is all about $$.

          Alexander Cockburn: “The $850 billion chicken comes home to roost. The military industrial complex is not designed to actually fight wars. If so, you wouldn’t see Ukraine struggling right now to win one….

          Watching a recent video of Ukrainian troops scrambling out of a U.S.-supplied Bradley armored fighting vehicle just after it hit a mine, I remembered how hard the U.S. Army bureaucrats and contractors who developed the weapon had fought to keep this vehicle a death trap for anyone riding inside.

          As originally designed, the Bradley tanks promptly burst into flame when hit with anything much more powerful than a BB pellet, incinerating anyone riding inside. The armor bureaucrats were well aware of this defect, but pausing development for a redesign might have hurt their budget, so they delayed and cheated on tests to keep the program on track. Prior to one test, they covertly substituted water-tanks for the ammunition that would otherwise explode.
          https://responsiblestatecraft.org/2023/07/18/the-850-billion-chicken-comes-home-to-roost/

          It’s truly shameful and downright embarrassing. Yet “liberals” here abide no criticism of DOD and see no reason to question ever more bloated “defense” budgets. At the very least you would think that economists would be interested in cost-effective spending and good governance. But that seems not the case…good governance is only for social programs!!!

          2. 2slugbaits

            JohnH I doubt if either you or Alexander Cockburn have ever been in a Bradley. The first generation Bradley’s were vulnerable due to the aluminum armor, but that same problem afflicted the Bradley’s predecessor, the M113. In fact, the Bradley uses the same chassis as the M113. The Bradley was much more survivable than the M113, which was a real deathtrap on tracks. But all that’s ancient history. Over the last forty odd years the Bradley’s survivability has been much improved; e.g., advanced fire suppression systems which have proven their worth in Ukraine. Also, the Bradley can be outfitted with reactive armor that protects the hull, the details of which are highly classified. If you want to criticize the Bradley, then focus your attention on the M2/M3 transmission, which has been a chronic problem since the first Bradley rolled off the line. Now that’s been a real cash cow for the prime contractor. The transmission is incredibly complicated with tolerances measured in the ten-millionths of an inch and just the kind of poor reliability you might expect from something that complicated operating in a filthy battlefield.

            BTW, the Bradley’s are really cramped inside. A long time ago (and a few pounds ago) I could crawl my way into the commander’s seat. And the troop carrier section is so cramped that during the Gulf War a network news correspondent who was riding along with some unit exited (or as the Army calls it, “egressed”) the Bradely and promptly fell over dead from a blood clot.

    2. ltr

      Another chronological trend to ponder: the decline of pentagon spending as % of federal outlays. that declined from roughly 2/3 for defense prior to great society to 8 to 10% of outlays recently.

      [ This is importantly incorrect. Defense spending has never been less than 55% of federal consumption and investment:

      https://fred.stlouisfed.org/graph/?g=ndEV

      July 27, 2023

      Defense spending was 55.6% of federal government consumption and investment in April through June 2023. *

      $970.7 / $1,747.2 = 55.6%

      * Billions of dollars ]

      1. pgl

        You little misleading ratio has been called out before. Do we need to remind you over and over of how incredibly dishonest this is? Damn!

        1. ltr

          You little misleading ratio has been called out before. Do we need to remind you over and over of how incredibly dishonest this is? Damn!
          You little misleading ratio has been called out before. Do we need to remind you over and over of how incredibly dishonest this is? Damn!
          You little misleading ratio has been called out before. Do we need to remind you over and over of how incredibly dishonest this is? Damn!

          [ Notice the nutty viciousness, over and over and over. ]

      2. Macroduck

        Your comment is either utterly ignorant or utterly dishonest. Anonymous compared military spending to totalfederal outlays. Your comparison is to consumption and investment – a subset oftotal outlays. Why would you think anyone wouldbe fooled by that trick?

        1. pgl

          I would be happy if ltr included nondefense purchases by the state and local governments. But she routinely refuses to do so – which is beyond dishonest. She knows it but she don’t care. Yea – ltr is moslt a dishonest worthless troll.

      1. pgl

        I’m going to refrain from saying how dishonest this is since I have wasted my time reminding you that this is dishonest. So here is my reply from here on out.

        YOU LIED.

        BTW when you call me a racist – you are lying there as well. Stop LYING.

  5. AS

    Professor Chinn,
    BEA Table 3.11.6. Real National Defense Consumption Expenditures and Gross Investment by Type, Chained Dollars is the table I found for national defense consumption expenditures and gross investment, but I could not find data earlier than 2002 Q1. It looks like the 2023Q2 value is $787.4 billion, which seems to agree with Figure 1.

    2. AS

      Professor Chinn,
      I found BEA table 1.1.4 (line24) which shows the inflation index for defense spending and was able to convert nominal defense spending to real defense spending. I wonder if this what you had to do.
      I also had to revisit a 2014 post you wrote that explained the use of the log ratio. I had forgotten how to understand the change in the ratios over time.
      If I understand the data related to the log ratio of defense spending to real GDP, defense spending has decreased by about 84% compared to the growth of the GDP from 1972Q1 to 2023Q2. The log ratio declined from about –2.41 as of 2002Q1 to -3.25, or about 1.63% per year.
      Still could not find data prior to 1972. I assume there must be some retro source.

  6. James

    I live by the Madison airport from which the National Guard operates the new F-35. Every time they boom over my head – I think there goes $33-35,000 per hour. https://www.businessinsider.com/price-military-aircraft-per-flight-hour-2016-8?op=1 Personally I would rather have more parks, green energy, bike paths, or health care spending.

    Also I realize that just maintaining the logistics/supply chain for these systems is immense – let’s hope that all these trained military get jobs as electricians, mechanics, HVAC, construction in civilian life.

    By the way, the latest Russian war on Ukraine has shown that manned fighter jets are becoming obsolete.

  7. ltr

    https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=survey#eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDNdLCJkYXRhIjpbWyJjYXRlZ29yaWVzIiwiU3VydmV5Il0sWyJOSVBBX1RhYmxlX0xpc3QiLCI1Il1dfQ==

    July 27, 2023

    Defense spending was 55.6% of federal government consumption and investment in April through June 2023. *

    $970.7 / $1,747.2 = 55.6%

    Defense spending was 20.8% of all government consumption and investment in April through June 2023.

    $970.7 / $4,684.1 = 20.7%

    Defense spending was 3.6% of GDP in April through June 2023.

    $970.7 / $26,835.0 = 3.6%

    * Billions of dollars

  8. pgl

    So Faux News interviews Johathan Turley and gets this Trump toadie to suggest that yesterday’s indictment undermines the First Amendment. Yea – Turley will say anything to make the MAGA crowd happy.

  9. pgl

    Ron DeSantis pulls what I used to call a Bruce Hall. But of late, it has been JohnH who comments on things he has not bothered to read:

    The Florida Republican governor wrote on X, formerly known as Twitter, moments after the indictment was handed down. He wrote, “As President, I will end the weaponization of government, replace the FBI Director, and ensure a single standard of justice for all Americans.” He admitted that he has not read the indictment.

  10. pgl

    We have a new winner for dumbest troll comment EVER!

    JohnH
    August 1, 2023 at 6:29 pm
    Personally, I would never rely on ‘expected inflation’ to calculate an ex ante “real” return, given how bad the forecasts of expected inflation have been over the past few years.

    The ex ante real return is by DEFINITION the nominal return minus expected inflation. But I guess Jonny boy can’t use that measure. No his measure is the size of his tiny little brain.

    BTW a year ago market forecasters were saying they expected inflation was near 3% but Jonny boy kept saying he expected inflation to be 6% or more. Guess what has happened over the past 12 months? The price level rose by 3%.

    1. pgl

      Brucie just figured out that the F-35 fighter jet was a boondoggle? Dude – I got news for you. Christopher Columbus proved that earth is not flat.

    2. pgl

      I was wondering who was President when this boondoggle began:

      “Almost since the F-35 program was announced in 2001, it has been the symbol of America’s dysfunctional military-industrial complex.”

      George W. Bush who also gave us the Iraq disaster!

    3. pgl

      From page 42 of their 10-K filing:

      ‘Our Aeronautics business segment is engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies. Aeronautics’ major programs include the F-35 Lightning II, C 130 Hercules, F-16 Fighting Falcon and F-22 Raptor.’

      This sector generated $27 billion of their $66 billion in sales for 2022. Page 32 notes:

      ‘In 2022, international customers accounted for 33% of Aeronautics’ net sales. There continues to be strong international interest in the F-35 program, which includes commitments from the U.S. Government and seven international partner countries and nine FMS customers, as well as expressions of interest from other countries. The U.S. Government and the partner countries continue to work together on the design, testing, production, and sustainment of the F-35 program. Other areas of international expansion at our Aeronautics business segment include the F-16 and C-130J programs, which continue to draw interest from international customers for new aircraft.’

      Page 33 is devoted to the status of the F-35. Yep – this boondoggle has made a lot of money for this company.

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