Sunday, June 14, 2009

Did Bush Spend the Peace Dividend?

I'm no fan of Bush, but I find myself arguing against certain misconceptions about his fiscal performance which continue to persist. One such misconception is that he spent an insane amount of money on the military. Nominally (that is, in raw dollar amounts) this appears to be true, but while he did increase funding relative to the Clinton administration it was still very low by historical standards.

So let's start with a picture. Here is a graph of defense spending as a percentage of GDP from 1940 to 2003.So the end of the cold war did result in a peace dividend (lower defense spending) and this situation persisted through 2003. Bush did increase funding from the low point in 2000 but only to circa 1994 levels.

After 2003 the picture is more complicated because the Iraq war spending is not reported. I took Iraq war spending numbers and combined them with reported military outlays and then divided by nominal GDP. The result is summarized in the following graphic, where I include the levels from corresponding years in previous decades for reference.

Here we can see that even in 2006 with the Iraq war in full swing we spent less on total military expenditures relative to GDP than during 1976 (with the Vietnam war fully wound down) or 1986 (at the height of the cold war). The 1990s were definitely a period of relative low military expenditures but in historical perspective Bush's spending on defense was not very high even with Iraq war expenditures accounted for (and by the way, the entire practice of keeping things off the budget is very distasteful, shame on the Bush administration for that).

In particular we can still claim a peace dividend during the 2000s relative to the cold war.


  1. I don't see why it is inappropriate to separate Mobilization-related expenses from General budget expenses. I'm not sure what is included in your source data (they don't give breakdowns) but the Clinton Administration certainly had general defense appropriations bills, and then separate appropriation bills for funding "emergency" spending on the Bosnia war. Those supplemental amounts included the costs of maintaining our No Fly Zone over Iraq. I am unclear of whether or not those numbers ended up being consolidated into the funal budget numbers.

    And I wouldn't be surprised if the numbers above also don't include the billions in funding for our mobilizations during Katrina and the Tsunami.

    I'm not saying that these costs should be excluded. But the distinction should be preserved. We ought to understand the spending on a standing army, procurements and R&D changes. It is a meaningful statistic apart from expenditures associated with mobilizations.

  2. It's one thing to separate expenses into different categories, and another thing to put them "off budget" entirely. The latter appears a tactic to minimize the costs of an unpopular war for a constituency concerned about deficit spending.

    But hey folding them back in it's still not that much money compared to the 80s, when there was no hot war.