“Why the U.S. Can and Should Cut Military Spending” The National Security Forum Reno, Nevada November 13, 2012 Christopher Preble

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Department of Defense Budget Authority, Source: Fiscal Year 2012 Green Book Table 6-8 – Dept. of Defense BA by Title Figures in billions of constant FY 2012 dollars.

Global Military Expenditures, 2010

Department of Defense Budget Authority, Source: Fiscal Year 2012 Green Book Table 6-8 – Dept. of Defense BA by Title Figures in billions of constant FY 2012 dollars.

Department of Defense Budget Authority, Source: Fiscal Year 2012 Green Book Table 6-8 – Dept. of Defense BA by Title Figures in billions of constant FY 2012 dollars.

Department of Defense Budget Authority Actual and Projected, Source: Fiscal Year 2012 Green Book Table 6-8 – Dept. of Defense BA by Title Figures in billions of constant FY 2012 dollars.

Department of Defense Budget Authority Actual and Projected, Source: Fiscal Year 2012 Green Book Table 6-8 – Dept. of Defense BA by Title Figures in billions of constant FY 2012 dollars.

AIA Studies In October 2011, George Mason University Professor Stephen Fuller argued that a reduction of $45 billion in DoD procurement spending would result in a decline of about $86.5 billion in GDP in 2013, and the loss of 1,006,315 full-time, year-round equivalent jobs. Fuller updated his findings in July 2012, and now concludes that the automatic cuts under sequestration, both defense and non-defense, will reduce the nation’s GDP by $215 billion, and cost 2.14 million jobs.

Zycher Cato Study On August 8, Cato published a study by economist Benjamin Zycher, which concluded that a reduction of $100 billion per year, nearly twice what is called for under sequestration, would reduce costs in the wider economy by $135 billion per year (the difference due chiefly to the excess burden of taxation).

Zycher Cato Study (continued) Even accepting Fuller’s decision to ignore the benefits that would flow from shifting resources from less to more productive uses, Zycher shows that Fuller’s multiplier is grossly inflated. Military spending contributes very little to GDP growth, and cuts would have very little long-term impact on GDP.

Defense Contribution to Real U.S. GDP Growth, (Annual Pct)

Private Investment Contribution to Real U.S. GDP Growth, (Annual Pct)

The Bottom Line on Sequestration, Military Spending and the Economy? Cuts currently under consideration are modest, and consistent with past post-war drawdowns. The United States will maintain a sufficient margin of military superiority over any conceivable combination of rivals even if it spends far less. Cuts in military spending should benefit the economy, and certainly in the long run.

Where Should We Be Going? Real cuts are politically feasible – and strategically wise – if we revisit some basic premises.

Strategic Misapprehensions At least four false, expensive, and bipartisan assumptions inhibit real spending cuts. –Counterterrorism requires nation building (aka COIN), and we can master nation building. –Alliances distribute our defense burden rather than adding to it. –Primacy pays; we should try to run the world. –Security threats are imminent, and require urgent attention and persistent global presence.

Strategic Misapprehensions At least four false, expensive, and bipartisan assumptions inhibit real spending cuts. –Counterterrorism requires nation building (aka COIN), and we can master nation building. –Alliances distribute our defense burden rather than adding to it. –Primacy pays; we should try to run the world. –Security threats are imminent, and require urgent attention and persistent global presence. three

Strategic Misapprehensions At least three false, expensive, and bipartisan assumptions inhibit spending cuts. –Alliances distribute our defense burden rather than adding to it. –Primacy pays; we should try to run the world. –Security threats are imminent, and require urgent attention and persistent global presence.

New Rules for the 21 st Century We should not engage in military operations overseas unless there is a compelling U.S. national security interest at stake. There must be strong public support for the mission. The mission must be clearly defined, and reasonably attainable. We should remember that war is a last resort.

Questions? Christopher Preble Vice President, Defense and Foreign Policy Studies