The Hidden Costs of Maintaining a Post-Industrial U.S. Military

Presentation to the Jewish Institute for National Security Affairs

In order to halt the current economic slide, restart the financial and housing markets, and implement a wave of new programs, the Obama Administration has proposed massive new spending programs across almost all parts of the federal government. The big winners are health care, energy, education and transportation.

Amidst all this spending, the Obama Administration has also promised to halve the projected budget deficit in its first term. For this reason, the Administration is in desperate need of a peace dividend.

The one loser among all these winners is defense spending. The Obama Administration plans to reduce defense spending – now at nearly $700 billion, including supplementals – by approximately 20 percent over the next four years. It will achieve these goals by maintaining an essentially flat base budget while reducing supplemental spending as U.S. forces withdraw from Iraq.

Defense spending will decline from approximately 4.2 percent of gross domestic product (GDP) to around 3.5 percent. This will be the lowest level of defense spending in GDP terms since the beginning of the Korean War.

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