Tuesday, June 07, 2005

Defense spending is 68% of the federal budget?!

On Monday The Atlanta Journal-Constitution published a fascinating column by an MBA student and his that recalculates the amount of total federal spending that actually goes to the military. Here's the start:

For fiscal year 2004, Defense Department expenditures were $436.4 billion, just under one-fifth of the total federal outlays of $2,292.2 billion --- but those numbers are a far cry from the real cost of defense. Many Americans think 19 cents on defense for every 81 cents on nondefense costs is a reasonable way to spend each tax dollar.

But the figures are wrong. A more accurate calculation brings us much closer to the truth: Each tax dollar actually splits 68 cents for defense and 32 cents on everything else.

The huge discrepancy results from the common misconception that total defense spending equates to Pentagon budget spending. But instead of the $436.4 billion defense expenditure figure used by congressional budgeters, statisticians in the Bureau of Economic Analysis, in the Commerce Department, more accurately counted $548 billion for calendar year 2004 --- a $112 billion difference.

And by our calculations, U.S. defense spending is much higher than even BEA numbers suggest --- $765.6 billion in calendar year 2004. That is $330 billion more --- or 75 percent higher --- than the Pentagon's budget.

The difference lies in the fact that, for example, nuclear weapons-related outlays come under the Energy Department's budget, not the Pentagon's. Likewise, Veterans Affairs has its own department and budget, all of it a defense-related category, reflecting obligations incurred to American service men and women due to past U.S. military activity. BEA accountants systematically reclassify each budget line item into "defense" and "nondefense" categories, thus arriving at their $548 billion figure for defense spending in calendar year 2004.

And here's the conclusion:

This means that on a per-capita basis, the average American did not pay $1,488 for defense in 2004, but $2,605. Military costs were $217.08 per citizen per month, while the rest of the federal government ran on $103.83 per citizen per month.

You may still shrug and say, "Well, it's worth it," and in a democracy we all must make that determination. But when the press reports 19 cents for defense vs. 81 cents for everything else, the split really is 68 cents vs. 32 --- the other way around. Considering the ongoing carnage in Iraq, perhaps it is time to reconsider that expense.


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