Defense Spending Is The Second-Largest Expense Item After
Entitlements, But Below Long-Term Trend as Share of GDP
¢ With budget deficits rising, some advocate cutting back on defense spending, the second-largest expense item after entitlements.
¢ Defense spending has risen substantially in recent years, due to the wars in Afghanistan and Irag, and other costs related to the Global War on Terror. As a percentage of GDP, however, defense spending in the U.S. remains below its 60- year trend.
¢ On an inflation-adjusted basis, U.S. defense spending is at its highest level since World War Il. With overhead ~40% of all spending, the Defense Business Board found DoD consistently pays “more for less” and fails to attack overhead as the private sector would.1
¢ The Esquire Commission to Balance the Federal Budget, a group of four former Republican and Democratic senators, found over $300 billion? in defense restructuring opportunities, and other analysts proposed gradual cuts to reduce the defense budget by 14% by 2018. 2
Notes: 1) The Defense Business Board , “Reducing Overhead and Improving Business Operations, “July 2010, http://dbb.defense. gov; 2) see Esquire
Commission to Balance the Federal Budget, http:/Avww.esquire. com/blogs/politics/federal-budget-statistics-1 110.; 3) Gordon Adams and Matthew
K P Leatherman, “A Leaner and Meaner National Defense,” Foreign Affairs, Jan/Feb 2011) (@)E) www.kpcb.com USA Inc. | Income Statement Drilldown 63
Defense Spending Has Risen,
Driven by Wars in Afghanistan + Iraq...
USA Inc. Inflation-Adjusted* Defense Spending by Type, F1948 - F2010
= Other Vietnam War « RDT&E*
$400B --- = Procurement
= Operations &
$200B --- Maintenance
U.S. Inflation-Adjusted Defense Spending ($B)
=u Personnel
$B 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008
Note: *Adjusted for inflation using GDP price index. **RDT&E is Research, Development, Test & Evaluation. KP Source: White House OMB. (@E) www.kpcb.com USA Inc. | Income Statement Drilldown 64
HOUSE_OVERSIGHT_020873