How Much Do We Spend on National Defense?

This seems like a simple question and our graph, which is drawn from the NIPA tables provided by the Bureau of Economic Analysis, shows defense spending rising from $393 billion in 2001 to $589 billion in 2005. Winslow Wheeler looks at the Congressional budgeting process and finds it to be very confusing:

Doing so is a serious mistake; the committees’ numbers are highly misleading, and sometimes have absolutely nothing to do with what is actually spent on defense. For example, on Sept. 21, the Senate Appropriations Committee announced the completion of the House-Senate Conference Committee to resolve differences in two very dissimilar versions of the Department of Defense Appropriations bills the House and Senate had passed earlier in the year. Describing the final result, the Senate Appropriations Committee stated “The bill provides $436.6 billion in new discretionary spending authority for the Department of Defense for functions under the Defense subcommittee’s jurisdiction, including $70 billion in additional appropriations to fund operations related to the Global War on Terror (GWOT).” The next day, the House Appropriations Committee said in its press release that the bill’s total was “$377.6 billion (PLUS a $70.0 billion bridge fund for military operations in Iraq and Afghanistan).” $377.6 billion plus $70.0 billion equals $447.6 billion, not the $436.6 billion the Senate Appropriations Committee cited. There’s an $11 billion difference in describing the same bill!

Fiscal conservatives might take heart that Congress is proposing to keep defense spending below $500 billion a year – even as the first half of 2006 saw national defense running at a rate around $615 billion per year. But let’s Mr. Wheeler continue:

Neither figure constitutes the Department of Defense’s budget for 2007 – with or without including spending for the wars in 2007, which will not be the $70.0 billion the committees described. The Senate and House Armed Services Committee also just reached agreement on different legislation, the National Defense Authorization Act for Fiscal year 2007. Those committees told us the total for defense was $532.8 billion ($85.2 billion more than the higher House Appropriations Committee figure above). But the numbers from the House and Senate Armed Services Committees – while in agreement with each other – have little, if anything, to do with the amounts will actually be spent on defense in 2007. Feeling confused? You’re not alone. Many journalists reported what one of Congress’s defense committees said and, as a result, misreported to the public just what is the budget for defense spending in fiscal year 2007, which started Oct. 1.

By the time he finishes explaining what has been left out of these figures, it turns out that the defense department budget is getting very close to $600 billion. And that does not include the Department Homeland Security (DHS) budget. I was hoping the OMB can give us a clearer idea of what the DoD and the DHS are spending. According to the OMB, DoD spent $474 billion in fiscal year 2005 and plans to spend $512 billion in fiscal year 2006, while DHS spent $39 billion in fiscal year 2005 and plans to spend $67 billion in fiscal year 2006. The 2007 budget suggests DoD spending will be only $505 billion for fiscal year 2007 with DHS spending dropping to $44 billion. Funny thing – even the combined actual spending figures are less than what the Bureau of Economic Analysis is reporting – so something is missing.

Mr. Wheeler is right – this is confusing. And I’m not sure why any fiscal conservative should trust this budgeting process as it suggests national defense spending will decline in fiscal year 2007. Look, I’m all for a strong national defense but if conservatives are serious about keeping tax rates low into the future, shouldn’t we all expect a little more clarity in such a large portion of the Federal budget?

Update: AB readers requested that I show defense spending as a percent of GDP for an extended time period, which I’ve done below. This only fair as the OMB’s claim that:

Provides $439.3 billion for the Department of Defense’s base budget – a 7-percent increase over 2006 and a 48-percent increase over 2001

confuses nominal spending increases with real spending increases. Defense spending as a share of GDP increased from 3.9% in 2001 to 4.7% in 2005. Defense spending as a share of GDP in the late 1970’s, however, was around 6% but increased to around 7.4% of GDP by 1986. It seems George W. Bush is a lot like Ronald Reagan: promising to give people their money back but actually increasing long-run taxation by having more defense spending.