Defense Spending Surges as Global Crises Persist
Author: Greg Valliere
October 13, 2022
IT’S IMPOSSIBLE TO GET AN EXACT HANDLE on how much the U.S. will spend on defense outlays because during this new fiscal year there will be “supplementals” that crop up, especially in the Overseas Contingency Operations account, which critics call a slush fund.
WE EXPECT TOTAL OUTLAYS will be around $800 billion in the fiscal year that began on Oct. 1 — an increase of about $50 billion over last year, give or take a few billion.
CRITICS ON THE PROGRESSIVE LEFT simply don’t have the votes to stop a huge spending spike; Congress may even exceed the $800 billion target in a defense bill that will pass by year-end. That would be more than 10% of all federal spending and nearly half of all discretionary spending.
U.S. OUTLAYS ARE FAR HIGHER than in any other country. China is expected to hit about $270 billion in the new year, the second largest spender in the world. India is third, the U.K. is fourth and Russia is fifth.
SINCE THE WAR BEGAN on Feb. 24, Washington has sent about $13 billion in arms to Ukraine, mostly sophisticated missiles. Additional outlays are virtually certain in the coming months.
THE ARGUMENT FOR MORE SPENDING has been bolstered by a wide range of provocations, not just from Russia. There’s North Korea’s missile testing, viewed as a prelude to a nuclear test, Iran’s naval threats in the Persian Gulf, and continued friction with China.
ANY HOPES FOR BETTER RELATIONS WITH BEIJING have been dashed by proposed new U.S. regulations designed to thwart China’s semiconductor chip industry. There’s an excellent column in this morning’s New York Times by Tom Friedman that details the looming chip war between the U.S. and China.
WITH REPUBLICANS LIKELY TO RE-CAPTURE THE HOUSE, this booming defense spending trend is likely to persist, as defense hawks point out that defense spending as a percentage of GDP is actually falling. So we think that by the middle of this decade, a $1 trillion annual outlay target will come into focus.
VOTES TO SPARE: We believe at least 75% of Republicans support a huge spending spike, along with perhaps 40% of Democrats — more than enough to dramatically increase outlays for shipbuilding (headed for a big hike), missiles, high-tech defensive systems and other weapons. Total global defense outlays should hit $2 trillion within the next three years.
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