U.S. Defense Spending in Historical and International Context

The U.S. economy has been growing faster than military spending, so defense spending as a share of GDP has been decreasing. While the $dollars spent are increasing, the percentage of GDP Defense Spending takes up has been decreasing since 1952. Perhaps a better question is do we really need to spend this much on Defense?

Perhaps wiser and defined expenditures may be in order?

U.S. Defense Spending in Historical and International Context

Econofact

The Issue:

The Facts:

Current U.S. military spending is higher than at any point of the Cold War in inflation-adjusted terms, but relatively low as a percent of national income. 

The graph above shows defense spending as a share of GDP. Military spending relative to GDP is arguably a more appropriate gauge of a country’s defense burden than the inflation-adjusted dollar amount, since a bigger economy can support greater spending. The $850 billion earmarked for defense spending in 2025 represents about 3% of GDP. This is a relatively low percentage as compared to the experience of the past three-quarters of a century. The United States economy tends to grow faster than military spending, so defense spending as a share of GDP has been decreasing. In the 1950s, and through the Vietnam era, defense spending was typically 8 to 10% of GDP, about three times higher than current spending relative to the size of the economy. After the Vietnam drawdown, defense spending dropped to around 4.5% of GDP which is almost 50 percent bigger than the current share of national income spent on defense. Defense spending increased to about 6% of GDP during the Reagan Administration while the “peace dividend” brought spending down to roughly 3% of GDP during the Clinton Presidency. The wars in Iraq and Afghanistan during the Bush and Obama administrations saw defense spending rise to about 4% of GDP.

Personnel costs account for nearly half of all defense spending, while most of the other half goes towards procurement, research, development, and testing.

The United States accounts for nearly 40% of global military spending. It devotes a larger share of its GDP to defense than most other countries. 

What this Means: