Sen. Lindsey Graham (R-S.C.): “Mr. Hale, what percentage of GDP [gross domestic product] are we spending on our national defense in this budget?”
Undersecretary of Defense (Comptroller) Robert F. Hale: “In ’15 it’ll be about 3.2 percent for DOD.”
Graham: “Okay. Historically, in times of peace, is that low or high?”
Hale: “Well, it depends on what history you’re looking at. But I know where you’re going. Now, if you go back 10 years … it was higher in the past. I’d argue it’s not a very good measure to determine the size of the budget, but it was definitely higher in the past.”
Graham: “Well, with apples to apples, it’s been well over 5 percent in times of peace.”
– exchange during a hearing of the Senate Armed Services Committee, March 5, 2014
When comparing federal budgets over different periods of time, raw numbers can be misleading. So budget analysts often look at spending as a percentage of the overall U.S. economy, or gross domestic product. While not a perfect measure, that figure at least puts the spending in context and helps account for population growth, inflation and other differences.
So Sen. Graham is on the right track when he wonders about the percentage of GDP. But what about his claim that “it’s been well over 5 percent in times of peace”?
Kevin Bishop, Graham’s spokesman, did not respond to queries, so we are not quite sure about Graham’s definition of “peace.” But let’s look at what the historical tables of the federal budget show (Table 8.4, pages 155-156). These go back to 1962.
Except for a brief dip between 1977 and 1980, immediately after the end of the Vietnam War, defense spending was above 5 percent of GDP every year between 1962 and 1992. Starting in 1989, defense spending fell from 5.6 percent of GDP to below 4 percent in 1995 — and even got as low as 3 percent between 1999 and 2001. Then it spiked again after the Sept. 11 attacks in 2001, hitting a high of 4.8 percent of GDP in 2010. But it never topped 5 percent.
So what happened in 1989? The Berlin Wall fell, and the Soviet Union collapsed, marking the end of the Cold War. Under the direction of then-President George H.W. Bush and then-Defense Secretary Richard B. Cheney, military spending was slashed by 25 percent and the active duty force was reduced by 500,000. At the time, it was known as the “peace dividend.”
So unless Graham is counting the Cold War as “a time of peace,” we don’t see any period in peacetime when military spending exceeded 5 percent of GDP. In the Ronald Reagan years, for instance, there was no major ground invasion such as in Iraq or Afghanistan, but Reagan’s military buildup was certainly aimed at deterring the Soviets.
President Obama’s budget, however, does show a sharp decline in defense spending as a percentage of GDP. By 2017, it would dip below 3 percent — and reach 2.3 percent of GDP in 2024. (See Table S-6.) Over the last half century, defense spending has never been that small compared to the rest of the U.S. economy.
The Pinocchio Test
One could quibble with the definition of “peace” — perhaps Graham really believes the Cold War was a time of peace — but Graham is setting up a bit of straw man here. After the fall of the Soviet Union a quarter century ago, defense spending has not topped 5 percent, even during the height of the wars in Iraq and Afghanistan.
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