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.
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.
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).
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.
The following charts provide some historical perspective on military spending.
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.
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.
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.
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.
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.
- 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.