Percent of GDP of Defense Spending…correction
lifted from comments from anne at Economistview:
Share of Gross Domestic Product of Federal Government, Defense and Nondefense Spending, 2000-2009 January 15, 2010
Percent of GDP of Defense Spending
2000 ( 3.7)
2001 ( 3.8) Bush
2002 ( 4.1)
2003 ( 4.5)
2004 ( 4.6)
2005 ( 4.7)
2006 ( 4.7)
2007 ( 4.7)
2008 ( 5.1)
2009 ( 5.5) Obama
[There are the proper shares of defense spending of GDP.]
(Rdan here update: The 2009 budget was the last of President Bush’s spending as a clarification, but the 2010 spending looks to be about the same)
Hence Paul Krugman’s post should say it this way (5.5% and not 4.2%):
August 14, 2010
A Tale Of Two Expenses
By Paul Krugman
Social Security outlays are projected to rise from 4.8 percent of GDP now to 6 percent of GDP in 2030. This is a huge crisis, requiring complete overhaul of the system.
Defense spending rose from 3.8 percent of GDP in 2001 to 5.5 percent last year; you should also add a couple of tenths of a percentage point for non-defense security spending. This was no big deal — certainly not a reason to reconsider the tax cuts sold back in 2001 as easily affordable given large projected budget surpluses.
Wouldn’t 2009 defence spending be mostly appropriated in 2008 when Obama was just a senator ?
Also I would have thought that defence spending wouldn’t all be part of GDP. Some is e.g. rent paid abroad on facilities abroad or salaries paid to foreigners employed abroad so the services are not produced domestically. I don’t think salaries paid to US citizens abroad count in GDP (mine sure doesn’t). I’d guess that not all US defence spending appears in GDP. Certainly it shouldn’t all appear in GDP. That means that even with Anne’s correction, the number should understate the DOD budget as a share of GDP.
I will post this and check more.
I am so confused. I give up. The BEA lists nominal defence spending as 662.3 Billion in 2007 http://tinyurl.com/3ykwvhz. The budget lists defence spending (and not just DOD also DOE) as 549.163 Billion in fiscal 2007 (http://tinyurl.com/3a2wblb outlays). The difference can’t be because of the non overlapping quarters (2006q4 is in fiscal 2007).
I claimed above that defence spending in GDP must be less than the total (as not all of the defence spending is domestic (I’d say a whole lot of it shouldn’t be counted as goods produced or services performed in the USA at all but in any case some of it has nothing to do with services provided by US residents or services provided in the USA or anything GDPish at all).
The budget might be fudged not to include supplementals (even though it seems very very complete). I’m sure that’s what tricked Krugman. I guess that state spending on the national guard is significant or something (I thought they were paid federal and commanded by governors but what do I know … less than I thought anyway)
I do not know how they are going to cut on spending if they are actually increasing it day by day.
Am I paying ~$662 billion or am I not? I am not so worried about whether the 5.5% is spent overseas or not as I am still paying for it one way or another. While SS will plateau at 6% of GDP, it will always have a revenue stream to be applied to it leaving a gap of 1.92% (I believe the latest number to be) not covered by the revenue stream. The 1.92% (if this is today’s number) is not what is being discussed today and we appear to be concentrating on the whole 6% which leads me to beleive the pols what the revenue stream without the SS payout.
Assuming I am paying for dese at 5.5% of GDP today. I am lazy and I wonder how this would match up against SS furture 6%? Obviously more . . .
Does this take the “black box” spending that the CIA and the State Dept spend on clandesdine ops around the globe? Off the top, I’ve read that this runs another $200B
In a more recent thread at Economist’s View, I set out the percentage of GDP devoted to defense spending yearly from 1945 through 2010 . . . all fiscal years. They differed from Anne’s figures you used, and she replied and repeated hers.
I then explained the reasons for the discrepancies — she, and a few others, but not the White House, the office of budget and management, Congress, or the Congressional research service, list other items that have nothing to do with military spending for a year. Such as veteran benefits besides for retirement. These additional items can raise the overall amount spent on national security — in which some outside analysts include like Homeland Security — by a third.
Obama’s first fiscal year budget (2010) did differ from the Bush defense expenditures: it included the expenses for Iraq and Afghan nation-building and non-military matters in the defense budget.
If you permit it, I will reprint my third post in that Economist’s View exchange. In it, you will also note a cross-checking measure: the percentage since 1945 of defense spending in the official federal budget. It went from about 40% in the late 1960s — and 72% of all spending at the end of the Korean war — to around 23% in the 2010 Obama federal budget. The big fall in defense spending was taken by spending on social security and Medicare-Medicaid (40% of all federal spending) and some other mandatory social programs, especially for income-support that added up to around 57% or so of all federal spending.
Here’s the link to the data, the sources, the controversy over what to include in defense spending etc.
Michael Gordon, AKA the buggy professor
Buggy, your numbers are good for starting a discussion, but it’s not exactly apples to apples, and just muddies to view.
muddies the view–sorry. A aecond point, we don’t pay a specific payroll tax for defense spending like FICA, so it really needs to come out of the comparison.
Krugman: “Defense spending rose from 3.8 percent of GDP in 2001 to 5.5 percent last year”
Yeah, yeah, I know. Krugman is always right. 😉
But not in his use of language. Yes, defense spending has risen since 2001. However, the GDP has tanked recently, in case nobody has noticed. Therefore to attribute the change in the defense-spending/GDP ratio to defense spending alone is misleading. And that is what this sloppy language actually does. And Krugman is not alone in such sloppiness. Sloppy language can lead to sloppy thinking. It is not difficult to firm up the language:
Defense spending as a percentage of GDP rose from 3.8 percent in 2001 to 5.5 percent last year.
The ratio of defense spending to GDP rose from 3.8 percent in 2001 to 5.5 percent last year.
Run that 1.92% is of taxable payroll over the 75 year actuarial window and includes a 100% reserve for the last year. This Table shows that the rate for the 75 years strictly defined is 1.8% of payroll or 0.6% of 75 year GDP.
Plus much of that GDP burden from SSA is backloaded whereas the military spending is happening right now.
Thanks for the better explanation. You are reinforcing my point on SS. The 5.5% defence budget does supercede the 6% projected for SS later which is what I was leading to in the end.
FY 2009 started in Oct 2008. Yes , you are correct.
Defense spending is always undersated it has links to other agencies, DoE runs the nuke weapons lab and builds and maintains nukes. DoT run coast guard. Dept Veterans Affairs etc……….
Buggy works for PNAC.
GDP is meaningless as a measure, except to con artists.
You all con look at my exchange with buggy at MT’s place.
GDP is meaningless. I need to repeat this, as the other side keeps repeatingthe opposite as on C-SPAN 14 Aug AM.
What GDP means is that declining % GDP to the war machine hides the fact that real war machine consumption of the national treasure is rising, only less rapidly than the GDP. It rose most of the time when the PNAC cabal claims neglect of the war machine.
Which is a con. GDP is meaningless. I need to repeat this, as the other side keeps repeatingthe opposite as on C-SPAN 14 Aug AM.
While warfare state spending was rising slowly the enemy disappeared.
GDP is meaningless unless you want to equate the value of “enemy” GDP and its part toward their war machine.
Which in the case of terrorism, their GDP is around zero while the US is pillaging 5.5% of a huge GDP maybe $15T.
GDP is only useful to con artists who justify a huge war machine because is gets a little less cash (19.8% federal outlays) than SS (19.9% federal outlays).
If you can have “pensions” then surely the war fare state should be just as big.
Despite the fact the Brits spend less than 7% of their central government outlays for “defence” and it is breaking them.
THere are no peers on the horizon. Our banker the PRC increases it war machine by a few billion a year and it is called double digits increases because its basis is small.
And CIA estimates of GDPs related to military spending have always inflated the percents.
GDP is meaningless.
The US spends 50% of the world spending on war. And a lot of it is expensive toys.
GAO reported in Mar 2009, the 2010 data is incomplete because DoD did not get acquisition reports in according the the required deline, $1.6T is spend on 95 large “Programs” a fraction of the buying. That represents an 18% inflation over original cpost estimates. And that is ral growth in cost.
While the US enjoyed no enemy with a GDP much less spending an increasing amount in the $trllions for machines to fight WW II again.
Besides US war machine spending rise more rapidly than the GDP tanked.