Defense Spending Overview

From a thread on Reddit:

“Yes, the US spends $600 billion dollars on defense. And yes, that’s more than the next 7-8 countries combined (assuming China’s budget is honest, which we believe is not). And yes, the US spends about 36% of the worlds total spending on military.

“But, as [the original author]¬†also mentioned, as a function of GDP, the US is at 3.3% – lower than some nations (like Russia) and a far cry from the 5.6% the US spent in 1988 near the tail end of the Cold War. Source: World Bank.

“In the post WW2 world, this is at an all time low per the CFR with it having peaked at 16% around the time of the Korean War.

“Per the DOD budget request, this chart shows that:

  • $130 billion was requested just for military personnel wages for the 2.1 million active + reserve
  • A total of $177.9 billion was requested on just military personnel wages + benefits
  • Another $72.9 billion was requested for civilian pay and benefits for the 760,000 civilian FTEs in the DOD
  • A full $250.8 billion or 48% of the DOD base budget is allocated to JUST pay and benefits

“What does this mean? Consider that a Chinese soldier is paid roughly a tenth of the wages of a US soldier. So sure, if we went to a Chinese pay scale, we could save $120 billion overnight. But that’s neither feasible, wise, nor is it a good indicator of relative strength with China.

“This is further exacerbated by the fact that both China and Russia have huge domestic arms industries producing goods at domestic prices. Furthermore, the world arms industry isn’t an open market – the US doesn’t compete with China or Russia directly as nations only buy from other nations they trust. The US buys domestic or buys from close allies like Belgium and Germany, who have comparable costs of production. End result? The US often pays 2-4x as much for a fighter jet than the Russian equivalent because US wages, US suppliers, and US maintainers all cost US prices, not Russian prices.

“As a side note, this also irks me about the whole “arms trade” statistic and how the US is the number one exporter. Sure, by dollar amounts, we are – but our goods are magnitudes more expensive. The fact that Russia and China – producing goods at Russian and Chinese prices – are even close, should tell you who is exporting more physical quantity of goods, but I digress.

“In sum, using nominal spending gives you eye popping numbers, but it tells you little about relative strength between nations. If anything, it should tell you how little Europe actually spends on defense (especially in comparison to Russian strength), and that China is a lot closer to the US than most people realize.

Full thread.