Is Military Spending Justified by Security Threats? 

 In the recent ASSA meeting in Boston, Linda Bilmes, a Kennedy School lecturer, and Joseph Stiglitz, Columbia professor and a Nobel prize-winning economist, presented an interesting paper,  â€œThe Economic Costs of the Iraq War.â€?  They estimated the total economic costs of the war, including direct costs and macroeconomic costs, lie between $1 and $2 trillion. Interestingly, the â€œ$2 trillionâ€? figure was already projected by William Nordhaus, Yale professor of economics, even before the war. In his paper,   â€œThe Economic Consequences of a War With Iraqâ€?(2002),  he predicted the costs of Iraq war would reach from $99 billion, if the war is short and favorable, to $1,924 billion, if the war is protracted and unfavorable. 

 In the same ASSA meeting, Nordhaus raised important questions about excessive military spending in his paper entitled   â€œThe Problem of Excessive Military Spending in the United States.â€?  I am providing some excerpts from the paper below. 


 Nordhaus notes, â€œThe U.S. has approximately half of total national security spending for the entire world. Total outlays for â€˜defenseâ€™ as defined by the Congressional Budget Office were $493 billion for FY2005, while the national accounts concept of national defense totaled around $590 billion for 2005. It constitutes about $5000 per family. By comparison, the Federal government current expenditures in 2004 were $14 billion for energy, $4.7 billion for recreation and culture, and $1.8 billion for transit and railroads.â€? The question is whether the US is earning a good return on its national-security â€˜investment,â€™ for it is clearly an investment in peace and safety. The bottom line he argues, is probably not.  

 Nordhaus asks whether it is plausible that the United States faces a variety and severity of objective security threats that are equal to the rest of the world put together. Then he points the following facts. â€œUnlike Israel, no serious country wishes to wipe the U.S. off the face of the earth. Unlike Russia, India, China, and much of Europe, no one has invaded the U.S. since the nineteenth century. We have common borders with two friendly democratic countries with which we have fought no wars for more than a century.â€?  

 He raises the issue of strategic and budgetary inertia. â€œMany costly programs are still in place a decade and a half after the end of the cold war. The U.S. has around 6000 deployed nuclear weapons, and Russia has around 4000 weapons. There can be little doubt that the world and the U.S. are more vulnerable rather than less vulnerable with such a large stock of weapons, yet they survive in the military budget. There is a kind of security Laffer curve in nuclear material, where more is less in the sense that the more nuclear material floating around the more difficult it is to control it and the more like it is that it can be stolen.â€? He argues that todayâ€™s slow decline in spending on obsolete systems arises largely because there are such weak budgetary and virtually non-existent political pressures on military spending â€“ the â€˜loose budget constraints.â€™  

 He suggests that an excessive military budget is not just economic waste but also causes problems rather than solving them by tempting leaders to use an existing military capability. â€œCountries without military capability cannot easily undertake â€˜wars of choiceâ€™ or wars whose purposes evolve, as in Iraq, from dismantling wars of mass destruction to promoting democracy. To the extent that Vietnam and Iraq prove to be miscalculations and strategic blunders, the ability to conduct them is clearly a cost of having a large military budget.â€?  

 A final concern he raises is that the large national-security budget leads to loose budget constraints and poor control over spending and programs. â€œCongress exercises no visible oversight on defense spending and a substantial part is secret. Some of the abuses in recent military activities arise because Congress cannot possibly effectively oversee such a large operation where programs involving $24 billion are enacted as a single line item. Even worse, how can citizens or ordinary members of Congress understand the activities of an agency like the National Security Agency, whose spending level and justification are actually classified?â€?