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Soldier aiming rifle
8.01.02
Politics and Economy:
Inside the Pentagon
More on This Story:
Defense Dollars

On July 31, 2003, Reuters led its business news coverage with the headline "Defense Spending Driving U.S. Economy." In January 1961 President Dwight D. Eisenhower issued a warning about this symbiotic relationship between government defense spending and the economy in his farewell address to the nation. Indeed, Department of Defense and related defense spending accounts for the majority of federal spending in nearly every state. And the U.S. accounts for 43 percent of world military spending. What are the actual numbers? Click to find out.



CHART: Defense Dollars: Most Bang for the Buck?      

This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence — economic, political, even spiritual — is felt in every city, every state house, every office of the Federal government. --President Dwight D. Eisenhower's Farewell Address to the Nation


Eisenhower's words of warning undoubtedly hold extra weight, coming from an ex-General who had witnessed World War II defense spending restore a depression economy, and a president who presided over crucial years of the Cold War.

The current U.S. defense budget one of the largest in American history. The defense budget has not reached the high percentage of discretionary spending that it held during the Reagan administration. (Discretionary spending is the the portion of the federal budget that Congress can disperse — in 1982 defense spending accounted for 61.1 percent of the total discretionary budget.) However, the 2003 and 2004 budget numbers do not include the costs of the war in Iraq or peacekeeping and reconstruction efforts. Current Pentagon estimates run to $3.9 billion a month to keep nearly 150,000 American troops in Iraq. White House budget director Joshua B. Bolten puts the total reconstruction costs for 2003 at about $7.3 billion.

*NOTE ABOUT THE FIGURES:

U.S. Spending: As noted above, discretionary spending is the part of the budget over which Congress has control (the numbers exclude entitlements such as Social Security, Veterans Benefits and other mandated programs). The figures for the 2003 budget come from the most recent House Budget Committee documents as the full spending package has yet to be passed. These numbers are rendered in constant 1996 dollars for easier comparison. [Numbers were put into constant (1996) dollars by using the deflators 'total defense' and 'total nondefense' as presented in Table 10.1, Budget of the United States government, FY2004, Historical Tables.]

U.S. Budget Breakdown: The White House's Citizen's Tax Guide 2002 provides information on spending by agency and by function. The figures of spending by function reflect the discretionary budget. The figures by agency reflect the total federal outlay. Figures by function reflect interest payments on the national debt.

Sources: THE NEW YORK TIMES, July 31, 2003; Reuters: Defense Spending Driving U.S. Economy; Budget of the United States Government, 2004; Congressional Budget Office; Office of Management and Budget;
National Priorities Project

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