Center for Arms Control and Non-Proliferation

Debate: Four Percent of Gross Domestic Product for Defense?

by Travis Sharp [contact information]

February 26, 2009

An ongoing debate in policy circles involves the question of whether or not to allocate the defense budget each year as a specific percentage of America’s gross domestic product (GDP). Advocates of this approach typically recommend pegging the DOD base budget, which excludes both supplemental appropriations for Iraq and Afghanistan and Department of Energy-administered nuclear weapons activities, at four percent of GDP.

Senate Armed Services Committee ranking member Sen. John McCain (R-AZ), Chairman of the Joint Chiefs of Staff Admiral Michael Mullen, conservative security analysts, and several members of Congress have endorsed the four percent proposal. Sen. James Inhofe (R-OK) and Rep. Trent Franks (R-AZ) introduced a joint resolution, S.J.Res.10/H.J.Res.23, in February 2009 that calls for at least 4% of GDP to be spent on DOD’s base budget each year. The bill is similar to legislation they each introduced previously in the 110th Congress.

First and foremost, it is worth pointing out that when including war funding, the United States already devotes well over 4% of GDP to defense. Advocates of the four percent plan conveniently omit war costs from their calculations, as if spending on military operations in Iraq and Afghanistan somehow does not count as “defense.” Moreover, the United States spends significantly more, in inflation-adjusted dollars, for defense today than it has at any time since World War II.

Defense Budget Authority as a Percentage of U.S. GDP, FY 2000-2009
(in billions of constant FY09 dollars)

Fiscal Year	DOD Budget / as % of GDP	Total Defense Spending With Wars / as % of GDP
2000	370 / 3.1	387 / 3.2
2001	381 / 3.1	426 / 3.5
2002	408 / 3.3	448 / 3.6
2003	451 / 3.6	547 / 4.3
2004	467 / 3.6	570 / 4.4
2005	427 / 3.2	565 / 4.2
2006	446 / 3.2	605 / 4.4
2007	455 / 3.2	660 / 4.6
2008	493 / 3.4	709 / 4.9
2009	513 / 3.4	687 / 4.6

Table Notes: "Total Defense Spending With Wars" includes funding for Iraq, Afghanistan, and nuclear weapons activities.

Critiques of the four percent proposal have appeared in well-publicized fora. In brief, the four percent proposal fails in three important ways: it would add $1.4 trillion to $1.7 trillion to deficits over the next decade and provide more defense funding than is forecast to be necessary; it would determine budgets using rigid formulas instead of realistic threat-based analysis, which would allow procurement to drive strategy rather than the other way around; and it is politically unviable in the economic and budgetary environment faced by the United States.

The proposal to tie defense spending to GDP should be rejected by policymakers. GDP is an important metric for determining how much the United States could afford to spend on defense, but it provides no insight into how much the United States should spend. Defense planning is a matter of matching limited resources to achieve carefully scrutinized and prioritized objectives. When there are more threats, a nation spends more. When there are fewer threats, it spends less. As threats evolve, funding should evolve along with them. Defense spending should be determined according to threat-based analysis and budgetary survival of the fittest. If the Pentagon can make the case that the threats the United States faces justify larger budgets, then larger budgets should be allocated.

Unfortunately, setting defense spending at four percent of GDP would shield the Pentagon from careful scrutiny and curtail a much-needed transparent national debate.

For an in-depth rebuttal of the "Four Percent for Defense" proposal, see "Tying U.S. Defense Spending to GDP: Bad Logic, Bad Policy" in the Autumn 2008 issue of Parameters.