Trends in U.S. Military Spending

Tyler Durden's picture

This analysis is authored by Dinah Walker, analyst at the Council on
Foreign Relations’ Maurice R. Greenberg Center for Geoeconomic Studies,
and originally published here.


Military budgets are only one gauge of military power. A given financial commitment may be adequate or inadequate depending on the number and capability of a nation's adversaries, how well it spends its investment, and what it seeks to accomplish, among other factors. Nevertheless, trends in military spending do reveal something about a country's capacity for coercion. The following charts, from the Council of Foreign Relations, present historical trends in U.S. military spending and analyze the forces that may drive it lower.

These charts draw on data from the Stockholm International Peace Research Institute (SIPRI) and from the U.S. Bureau of Economic Analysis (BEA). Both data sets include spending on overseas contingency operations as well as defense. This distinguishes them from data used in the U.S. budget, which separate defense spending from spending on overseas operations.


U.S. Military Spending, $ Billions

  • In inflation-adjusted dollars, SIPRI's measure of U.S. military spending rose sharply after the terrorist attacks of 2001.
  • In 2011, military spending declined by almost $9 billion, the first such decline since 1998.
  • Sequestration scheduled to take effect in January promises about $55 billion in cuts to U.S. military spending, although the baseline against which these cuts will be made remains unclear.
  • The president's 2013 budget requests $728 billion in military spending. If this were used as the baseline, sequestration would mean a 7.5 percent reduction in military spending from the president's requested level in FY 2013.

U.S. Military Spending, % of World

  • When U.S. inflation-adjusted military spending fell by one-third in the 1990s, the U.S. share of global military spending only fell by six percentage points because other countries, particularly Russia, reduced their military spending as well.
  • By contrast, the 1.2 percent fall in U.S. military spending in 2011 resulted in a 0.6 percentage point fall in the global share, as military spending by the rest of the world simultaneously increased.

To see why U.S. military spending is likely to keep falling as a share of global military spending, it helps to look at the drivers of this ratio. For any country, a change in military spending as a share of the global total can be attributed to two factors: changes in income and changes in the allocation of that income. A rising share of global military expenditure based on a rising share of global GDP is likely to be more sustainable over the long term than a rise based on a decision to spend more of GDP on defense at the expense of other priorities. The following charts distinguish between the impact of growth and the allocation of income on the U.S. share of global military spending.

Growth Effects on U.S. Military Spending

  • From 1990 to 2000, U.S. growth roughly kept pace with global growth. So the impact of U.S. growth on the nation's share of global military spending (represented by the red bars) offset the impact of rest-of-the-world growth (represented by the purple bars). As a result, the net growth effect, shown by the blue line, was close to zero.
  • Over the past ten years, faster foreign growth has reduced the U.S. share of military spending.

Policy Effects on U.S. Military Spending

  • The impact of growth on military budgets, shown above, has been disguised by shifting policy on how much of GDP to allocate to defense.
  • In the 1990s, the United States cut the defense budget (shown in the blue bars), whereas in the 2000s, the defense budget increased.
  • Between 1990 and 1995, cuts in foreign allocation of GDP to defense (especially in Russia) boosted the U.S. share of total military spending (the green bar). Since 1995, the rest of the world has spent a fairly stable share of GDP on the military.

U.S. Military Spending Share of Global Total

  • Combining the two previous charts, it is clear that changes in spending as a percentage of GDP have buoyed the U.S. share of world military spending, while changes in GDP have been a headwind.
  • A decline in the U.S. share of world military spending seems likely in the absence of a new sense of insecurity.

The next chart consolidates the information from the previous three images. The black line shows the U.S. share of world military spending at five-year intervals, while the bars show what drove the change during each five-year period. The blue bars show how willing the nation has been since 2000 to spend a rising share of GDP on defense. If one assumes this commitment holds steady in the next five years, and if one uses International Monetary Fund growth estimates for the United States and its rivals, the U.S. share of military spending is set to decline as U.S. GDP growth (represented by the red bar) is lower than that of other military powers (represented by the purple bar).

U.S. Military Spending, Share of Global Total

If the United States decided to spend a smaller share of GDP on the military, the black line above would decline more sharply still. How likely is this? The following two charts show how U.S. overseas operations have been shrinking and that they are likely to continue to do so.

Funding for Overseas Contingency Operations

  • Overall funding for overseas contingency operations has declined by just over 50 percent since 2008 as the war in Iraq has wound down.
  • Funding for the two operations was as high as $187 billion in fiscal year 2008, which represents 30 percent of SIPRI's measure of U.S. military spending for that year.
  • War funding is projected to come to $96 billion in fiscal year 2013, but it is likely to decline thereafter with the winding down of the war in Afghanistan.

Troop Levels for Overseas Contingency Operations

  • As of fiscal year 2012, the number of troops deployed in Afghanistan and Iraq has declined 49 percent since fiscal year 2008.
  • Troop levels are projected to decline a further 28 percent in 2013.

The following charts provide some historical perspective on military spending.

U.S. National Defense Spending

  • U.S. national defense spending has ranged widely, from less than 1 percent of GDP in 1929 up to 43 percent in 1944. These extremes illustrate that resource allocation to defense can increase rapidly when a war demands it.

U.S. National Defense Spending

  • Focusing just on the post-World War II period, U.S. national defense spending as a percent of GDP has ranged from a high of 15 percent in 1952 (during the Korean War) to a low of 3.7 percent in 2000 (the period of relative tranquility preceding the terrorist attacks of the following year).

U.S. National Defense Spending

  • In the post-Cold War world, the U.S. national defense budget has fluctuated within a relatively narrow band. It fell by about three percentage points of GDP as the nation reaped the peace dividend of the 1990s, then rose after the terrorist attacks of 2001.
  • President Obama's budget proposes cutting security spending to 3.7% of GDP in 2018. This would match the 2000 level and represent the lowest allocation of GDP to defense spending in the post-World War II era.

To put U.S. military spending in context, consider GDP and population shares as of 2011. The pie charts demonstrate that the United States accounts for a larger share of military spending than of either GDP or population, and would continue to even if military spending were to revert to 2000 levels as a percent of GDP.

Military Spending, GDP, and Population

If U.S. military spending were to revert to its 2000 level over the next five years, as President Obama has proposed, and the rest of the world were to continue spending the same portion of its GDP on the military, U.S. military spending as a share of the global total would decline sharply, to just under 30 percent.

U.S. Military Spending Share of Global Total

As noted at the outset, military power depends on multiple factors, including the military budgets of a country's allies. To get a sense of this factor, the sixth chart above was redone, with spending by NATO, Japan, South Korea, Israel, and Saudi Arabia added to the analysis. The United States and these allies account for a formidable 71 percent of global military spending in 2010. However, as the black line in the chart shows, the trend is less reassuring. The United States' and its allies' share of world military spending fell from 2005 to 2010. It is projected to fall further, to 64 percent by 2015, even if U.S. spending as a share of GDP holds up at today's levels. Budgetary pressures in Europe may mean this share falls even more rapidly.

U.S. and Allies' Military Spending

Democracies' Military Spending

  • Democracies are generally regarded as friendly to the United States, and this chart delivers a similar verdict to the last one.
  • After the collapse of the Soviet Union, democracies accounted for the vast majority of the world's military spending.
  • However, since the early 1990s, this share has declined slightly.

U.S. Military Spending % of Democratic

  • The United States accounts for almost half of all military spending by democracies.
  • A decline in U.S. military spending is therefore likely to have a large impact on democracies' military spending as a share of the global total.

What would happen if the U.S. defense budget were cut? Differences in military spending among countries tend to have a big influence on equipment procurement and a far smaller one on personnel count.

Military Equipment and Spending

  • This chart compares each country's share of spending and share of military equipment. The equipment measure includes twenty-one categories such as tanks, aircraft, and satellites.
  • Spending and equipment levels are correlated. Russia is the exception, perhaps because it still has equipment left over from its period of high spending before 1990.

Personnel and Spending

  • Unlike equipment, personnel is relatively uncorrelated to spending.
  • Because of differences in labor costs, $1 million in the United States will hire fewer soldiers than $1 million in Russia or China.
  • If military budgets were compared in a way that reflected varying personnel costs, U.S. military preeminence would appear smaller than it does using straightforward comparisons based on market exchange rates.

Personnel Payroll Outlays

  • The effect of defense cuts on personnel would depend on which part of personnel spending suffered.
  • Of the $195 billion in Department of Defense payroll outlays, only $84 billion went to active-duty military pay.
  • Retired military pay, which does not directly increase defense capabilities, accounted for nearly 20 percent of total personnel expenditures in 2009.

DoD Personnel

  • The number of personnel employed by the Department of Defense has declined since the 1960s, while personnel costs have risen rapidly, in part due to rising U.S. health-care costs.
  • The cost of military pay and allowances and military health care has risen 90 percent since FY 2001, while the active-duty personnel count has risen by less than 3 percent.
  • Military health-care costs have risen from $19 billion in FY 2001 to $48.7 billion in FY 2013.

As noted above, rising spending on defense personnel has not resulted in increasing troop strength. The following charts illustrate two additional reasons why spending may overstate the U.S. ability to project power.

Cost of Ships vs Inflation

  • The cost of military hardware has grown more than inflation. Today's spending results in less procurement than does spending in the past.
  • Although the rising cost of hardware partly reflects rising quality, shipbuilders reported to the RAND Corporation that uncertainty surrounding the number of ships ultimately purchased increases labor costs and reduces the incentive to invest in processes that could reduce costs.

Investing to Stand Still

  • Countries such as the United States that have invested a substantial sum in their military must spend simply to maintain existing levels of equipment.
  • The chart shows that the United States must spend about 1 percent of GDP on military hardware just to tread water.
  • Spending in countries that have low military capital stocks will result in larger increases in defense stocks due to lower levels of depreciation.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
q99x2's picture

Looks like they must be winding up the preperations for the big one. They have to fight the Russians, the Chinese, the Americans. I think they need to go have a talk with old Mr. Rockefeller if they expect to win this one.

CH1's picture

Someone's making a LOT of money.

LeisureSmith's picture

Cost-plus is Doubleplusgood.

The Complex

Silver Bug's picture

We need to bring all the troops home. Shut down the 1000's of bases all over the world and worry about protecting ourselves. Ron Paul has the right idea.

Doubleguns's picture


Imagine those troops living expenses being spent right here from buying beer, movie tickets, food, everything else they need here in the good ole USA. That s alot more dollars staying right here at home being pumped right back into our economy instead of being syphoned off into some other local economy.

reader2010's picture

It lookslike they need to kill all those refuse to conform.

moonstears's picture

"Retired military pay, which does not directly increase defense capabilities, accounted for nearly 20 percent of total personnel expenditures in 2009."

Once again, fuckers wanna skip on the folks who are at the end of the gig. So what if ZH, at some future date, sent the Tylers notice...somethin' like: "We know we said if freedom of speech get's hammered, and the shit gets thick, we'd post bail. Then we realized you can't send in stories from jail, and bail's pretty expensive, so plans have changed." What would the collective Tylers feel about this, I wonder, shoe on the other foot, and all?

Bringin It's picture

Sorry I don't understand your post, but the Tylers decided a long time ago that they did not want to have to wait for anyone to post bail and so wisely got themselves and their servers out of Dodge a long time ago.

Doubleguns's picture

I would venture to say (I could be wrong) that a large portion of the retired pay is now going to "medically retired" veterans who had thier ass blown up and are missing body parts. There is a cost that we must endure if we send our children off to war. We can not just kick them to the curb when they come home in mangled states.

Moonstears I did not see anyone saying we needed to drop that cost. I think (hope) they were just pointing out facts.


blindman's picture

which terrorist attacks are being referred to?

Element's picture

All of them ... there's like, lots and lots.

blindman's picture

what became of the dov zakheim missing
2+ trillion federal reserve notes?

billwilson's picture

The only way to budget sanity involves massive military spending costs (which the graphs above underestimate because all types of military expenses are hidden in other departments like Homeland Security). The US can no longer afford to spend around a trillion a year unless folks are willing to pay a heap more in taxes ... a LOT more!

A Lunatic's picture

Since when does "willingness" come into the equation?

Watauga's picture

Perhaps if the U.S. had charged the likes of Germany, Japan, UK, France, Italy, South Korea, Saudi Arabia, Israel, Egypt . . .   over the last 70 years for the defense "services" provided, we would not have any debt or budget deficits?  Never too late.  Tell the bloodsucking leeches that if they want us to save them from totalitarian tyranny then pay up.  Otherwise, withdraw from the worldwide presence (bases), slash numbers and systems, and restore some sanity to our own finances. 

Dr. Engali's picture

"In inflation-adjusted dollars, SIPRI's measure of U.S. military spending rose sharply after the terrorist attacks of 2001."

Hmmmm there seems to be something out of place with this statement.
Let's see nineteen men with $1 box cutters high jacked 4 planes and we respond By going from roughly 400 billion to $ 700 billion annually in military spending. That's one hell of a return on investment. $19 in box cutters. Two towers ( covered by insurance ) 1 building + demolitions 4 planes (covered by insurance ) and 3000 lives. What did we get? Two new wars countless more dead , trillions more in debt and a police state.

Sounds like 19 "terrorists" got more for their money.

dunce's picture

The box cutters were the result not of any military laxity or funding but the direct result of our immigration policies, but your point is well taken that the billlions we have squandered on government whose duty it is to protect us from things like that screwed us royally and then wasted more billions on TSA when all that was needed was real border control. We are not obligated to allow any muslims into this country and could control those already here.

Disenchanted's picture



"We are not obligated to allow any jews into this country and should control those already here."


I agree...


especially the ones like this that blindman pointed out above:


what became of the dov zakheim missing
2+ trillion federal reserve notes?

Watauga's picture

"Two new wars countless more dead , trillions more in debt and a police state."

Great post overall, Doctor, but I think this is the key point.  COUNTLESS DEAD.  Let's pause right there and think about what the U.S. response to 9/11 has been.  

(1) Wax Al Qaeda in Afghanistan.  Fine.  Assuming intel indicated UBL was to leader of the people who pulled off 9/11, then okay, take them out.  All of them. 

(2) This is a one-two punch--in and out.  The thousands of U.S. and "coalition" casualties, the tens of thousands of civilian casualties, and the X number of "bad guy" casualties--most are the result of the "staying the course."  What course?  Oil, the monied interests, controlling Iran and Russia. . .   Sounds more like it.

(3) Iraq?  Hmmm . . .   WMDs.  Terror support.  Spread democracy.  Seriously, we could not even get the backstory straight.  Oil, the monied interests, control of Iran and Russia. . .   Sounds more like it.

(4) Syria, Iran, Libya, Egypt. . .  Tens of thousands dead and many more injured in what the Leftist media wants to insist is a pro-democracy movement in the MIddle East.  What, did they suddenly buy off on W's "religion" of why he went to war in Iraq (reason #3)?  Come on.  Again, Oil, the monied interests, control of Iran and Russia. . .   It is what this, too, is all about.

Truly, the casualties are countless, and all those beyond killing our Al Qaeda enemies in Afghanistan are attributable to poor policy decisions by W and BHO and their cronies.  "Poor" from our perspective, but "necessary and proper" for them since they rode the path to election using the fuel supplied by the monied interests and certain lobbies.  

blunderdog's picture

"Spending" isn't a gauge of power at all.  It doesn't matter how much you spend if you accomplish nothing.

Big problem I have with any so-called data about "global" military spending is that it can't track private criminal activity, and that's really important when thinking about the nation-state's role in the world. 

No one who does the buying is shopping for price.  Once the market is commoditized, you're behind the curve.

ekm's picture

To those who think that banks are powerful? You are wrong.

These guys are powerful, the military industry. These guys tell Barack, Benny Bernanke and Jamie Dimon and Lloyd Blankfein what to do.

This is where the power is, the real power.

ekm's picture

This is fresh. Just if you had any doubt about who's Obama's or Benny's or Jamie's or Lloyd's boss.


Disenchanted's picture




"These guys are powerful, the military industry. These guys tell Barack, Benny Bernanke and Jamie Dimon and Lloyd Blankfein what to do."


They all have the same boss(es).


Whatta's picture

In Krugman-think, bombs lead to a lot of broken windows. Bulllllllllish. Buy bombs, bullets and bazookas.....prosperity is sure to follow.

r3phl0x's picture

Destroy the stock to increase the flow.

Bill Shockley's picture

The sad thing is that one nuke and it's all over in the homeland.


What's left goes rogue.


A Lunatic's picture

The majority of what's left will go further 'Left' if you get my meaning. A very small minority will go rogue. See ya in the trenches.

AU5K's picture

From Dear Leader Obama:

"We cannot continue to rely only on our military in order to achieve the national security objectives that we’ve set. We’ve got to have a civilian national security force that’s just as powerful, just as strong, just as well-funded as our military."

eaglefalcon's picture

civilian national security force


I wonder if Obama can build an SS and claim that this is a "well organized militia required for the security of the state" mentioned in the second Amendment.  

otto skorzeny's picture

is that a real quote from our Beloved Comrade Leader?

Cthonic's picture

Listen and weep

Obama, July 2, 2008 Colorado Springs, CO: [As] president I will expand AmeriCorps to 250,000 slots [from 75,000] and make that increased service a vehicle to meet national goals, like providing health care and education, saving our planet and restoring our standing in the world, so that citizens see their effort connected to a common purpose.

People of all ages, stations and skills will be asked to serve. Because when it comes to the challenges we face, the American people are not the problem – they are the answer. So we are going to send more college graduates to teach and mentor our young people. We’ll call on Americans to join an energy corps, to conduct renewable energy and environmental clean-up projects in their neighborhoods all across the country.

We will enlist our veterans to find jobs and support for other vets, and to be there for our military families. And we’re going to grow our Foreign Service, open consulates that have been shuttered and double the size of the Peace Corps by 2011 to renew our diplomacy. We cannot continue to rely only on our military in order to achieve the national security objectives that we’ve set.

We’ve got to have a civilian national security force that’s just as powerful, just as strong, just as well-funded. We need to use technology to connect people to service. We’ll expand USA Freedom Corps to create online networks where American can browse opportunities to volunteer. You’ll be able to search by category, time commitment and skill sets. You’ll be able to rate service opportunities, build service networks, and create your own service pages to track your hours and activities.

This will empower more Americans to craft their own service agenda and make their own change from the bottom up.



The following pledge is taken by AmeriCorps members, who promise to uphold the duties of their position, and reads as follows:  

I will get things done for America - to make our people safer, smarter, and healthier.
I will bring Americans together to strengthen our communities.
Faced with apathy, I will take action.
Faced with conflict, I will seek common ground.
Faced with adversity, I will persevere.
I will carry this commitment with me this year and beyond.
I am an AmeriCorps member, and I will get things done.
Watauga's picture

Nazi SA forces--the Brown Shirts.  From this the leadership will take the elite cadre and form its SS--the Black Shirts.

The SA will be used in "community action," rioting, disruption, false flag events.  The SS will "do what is necessary" to secure and grow power.

In the meantime, the hundreds of thousands of police personnel will be co-opted at the local level to do the bidding of the power elite.

UN forces?  Certainly will come into play if the millions of 2A believers actually take action and there is any risk whatsoever of things going the wrong way.  

The big question will be current military personnel.  My guess is that they will follow the leadership--what the Commanding General directs, the subordinate leadership will do, and whatever the subordinate leadership directs, the troops will do.

Colonial Intent's picture

WOW, send me whatever drugs you is on coz they is awesome.

Feckin retard.

SpykerSpeed's picture

If the military was halved, they could avoid the big bond market collapse coming up, or at least delay it a bit.  But that can't happen, not in this current political environment.  Keep stacking precious metals.

Contemplate_'s picture

eisenhower is my homeboy

Stuck on Zero's picture

Our middle class may be falling into poverty but by God we've got half-billion dollar fighter jets.  That's something to believe in.


otto skorzeny's picture

 best post i have read in a while-I think that is exactly what will be the downfall of American society-a quick,painful one at that.

wandstrasse's picture

a world reserve currency which is created out of thin air is not cheap.

radicall's picture

Looks like Active duty pay got a big bump in 2009. Good for them! They do real work and deserve to be paid better. Good job Obama.

Watauga's picture

Where is your [sarc] notation?

falak pema's picture

America has less than 5% of world population; consumes 25% of world energy, spends over 40% of the world military budget, and represents 50% of world fiat debt, (including shadow banking); 30 T whereas its own GDP is half of that! 

Its trade balance is chronically negative since 1975. So its an aggregate economic machine creating world debt and poverty.

How can a country with this profile pretend its the beacon of the world?

Your money, our military spending and our consumption of junk goods and foods. That sums it up.

Now in addition, we are killing the middle class, and the pyramid skews to 1% of the US population owning 50% of its fiat wealth, controlling this whole crazy shooting match. The whole of first world society is a neo-feudal domain. The third world has never left it as its been totally recolonised by the transnational corporates for RM looting via Extractive Empires. 

 Top 15 Richest Members Of Congress - Business Insider

Element's picture

You forgot this:  USSA incites, funds, covers for, sets in motion, if not outright commits 99% of all global acts of terrorism.

gatorengineer's picture

Where can I go read about the Obama plan inferred in the one graph......  Would like to see that.......  Now do a dollars per boot on the ground between Iraq and Afganistan and you will see alot of that money is likely going somewhere else in the military industrial complex (read boeing skunk works).....

Kaikoura's picture

See my article on my blog re defense spending:

Defense spending is the cancer that's eating away at the US economy.

Heroic Couplet's picture

Good riddance. Military spending is just socialism for defense contractors.

orangegeek's picture

Obama (I hope he gets trounced in November) has proven that you can easily soften up an opponent with drones.  They now have stealth drones.


Much cheaper than conventional jets and fewer US casualties.


Navy is still necessary to protect shipping lanes.  Can the Navy be turned into bots too?  Yes it can.


Army has "gone bots" too.


Much less expensive.

Pete15's picture

Yawn, people can hope all they want for cuts but the debt goes up every year. Romney or Obama who cares, their budgets already admit that the debt will go up. It goes up with flawed projections, all increases will be much worse than expected.

As for defense cuts

 "sequestration would leave the 2021 Pentagon with purchasing power about equal to what it had in 2006, leaving out the wars. That would leave more in real terms than what we spent on the military at the height of the Cold War." 

Obama said. “Over the next ten years, the growth in the defense budget will slow, but the fact of the matter is this – it will still grow, because we have global responsibilities that demand our leadership.”

Disenchanted's picture



All those trillion$ of taxdollars spent and trillion$ more in debt(cumatively) and on Sept 11, 2001 (if we are to believe the official story) our mighty 'Defense' Dept. and the 'security/intelligence' industry couldn't defend us against 19 Muslim(patsies) with boxcutters.


To me that = negative return on 'investment'

rwe2late's picture

Though underestimated (Homeland militarization, CIA, etc.), the proportion of current US global military spending is roughly accurate.

But the article’s predictions for the future course of events seem far too rosy.

For instance, the article predicts the US share of global military expenditures will drop because other countries will spend more. Why will they spend more? Well, for one reason, the US pressures them to arm and re-arm (Japan, Germany, India, Saudi Arabia, etc.) And from whom will they purchase armaments? Military spending by the US government could go down, yet the military share of US GDP could go up.

Why shall US government military spending decrease? Shall we assume the financial/military consortium will lose its political grip? Will the Homeland police, TSA, NSA all lose funding? Shall we assume new wars will not be found in Africa, Asia, and Latin America, areas where the US military is currently expanding operations? No more Mideast turmoil, Israel happy, Iran back in good graces of the US? Will Prohibition II be ended? Will our allied vassal states be stable and peaceful?

And of course, if US allies increase their military spending, won’t Russia and China feel threatened and increase theirs also? Will the ring of US bases around China and Russia be disbanded? Will the up and coming “space wars” be avoided? Or will the US just “have” to increase its military spending to meet the “rising” Russian and Chinese threats?

Don't expect a good "trend" to result from wishful and imaginary reductions in military spending.