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President Bush signed a $417.5 billion defenseappropriations bill for fiscal year 2005 on August 5,2004. With the addition of an $82 billion supple-mental for military operations in Iraq and Afghanistan, in real terms U.S. military spendingwill be at a level exceeded only by that of the waningyears of World War II and the height of the KoreanWar. The Defense Department had requested$401.7 billion, which was a 7 percent increase overthe FY04 defense budget. The recently submittedFY06 Pentagon budget is $419.3 billion (notincluding funds for military operations in Iraq and Afghanistan). The administration argues thatincreased military spending is a necessary part of the war on terrorism.Those budgets assumed that the war on terror-ism is primarily a military war to be fought by theU.S. Army, Navy, Air Force, and Marines. The reality is that large conventional military operations will bethe exception rather than the rule in the war on ter-rorism. Although President Bush claims Iraq is thecentral front in the war on terrorism, the truth isthat ridding the world of Saddam Hussein’s brutalregime did not eliminate an Al Qaeda sanctuary or a primary source of support for the terrorist group.The military’s role in the war on terrorism willmainly involve special operations forces in discretemissions against specific targets, not convention-al warfare aimed at overthrowing entire regimes.The rest of the war aimed at dismantling anddegrading the Al Qaeda terrorist network willrequire unprecedented international intelligenceand law enforcement cooperation, not expensivenew planes, helicopters, and warships.Therefore, an increasingly large defense budg-et (DoD projects that the budget will grow tomore than $487 billion by FY09) is not necessary to fight the war on terrorism. Nor is it necessary to protect America from traditional nation-statemilitary threats—the United States is in a uniquegeostrategic position; it has no military rivalsand is relatively secure from conventional mili-tary attack because of vast oceans on its flanksand friendly neighbors to the north and south.In fact, U.S. security would be better served by adopting a less interventionist policy abroad andpulling back from the Cold War–era extended secu-rity perimeter, which necessitates forward-deployedmilitary forces around the world. If the UnitedStates adopted a balancer-of-last-resort strategy (allowing other countries to manage the security of their own regions), most overseas U.S. military deployments could be eliminated and the defensebudget could be substantially reduced.
$400 Billion Defense Budget Unnecessaryto Fight War on Terrorism
by Charles V. Peña
_____________________________________________________________________________________________________
Charles V. Peña is director of defense policy studies at the Cato Institute.
Executive Summary 
No. 539March 28, 2005
Routing 
 
Introduction
On August 5, 2004, President Bush signedthe Defense Appropriations Act for fiscal year2005, which totaled $417.5 billion including$25 billion for military operations in Iraq and Afghanistan.
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The White House is also askingfor an additional $82 billion in supplementalfunding for Iraq and Afghanistan,
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whichwould bring military spending for FY05 tonearly $500 billion—more in real terms thanduring any of the Reagan years and surpassedonly by spending at the end of World War II in1945 and 1946 and during the Korean War in1952. The FY05 Department of Defense budg-et request was $401.7 billion,
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which did notinclude funding for military operations in Iraqand Afghanistan. According to the DefenseDepartment, “The fiscal 2005 budget includesrobust readiness and acquisition funding,important legislative authorities, and otheressentials for winning the global war on ter-rorism.”
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The White House is asking $413.9billion for the Pentagon in FY06.
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 According to the International Institute forStrategic Studies (IISS), in 2003 (the last yearfor which there are comparable worldwidedata) total U.S. defense expenditures were$404.9 billion.
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That amount exceeded thecombined defense expenditures of the next 13countries and was more than double the com-bined defense spending of the remaining 158countries in the world (Figure 1). The coun-tries closest in defense spending to the UnitedStates were Russia ($65.2 billion) and China ($55.9 billion). The next five countries—France, Japan, the United Kingdom, Germany,and Italy—are all U.S. allies. In fact, the UnitedStates outspent its NATO allies nearly two toone ($404.9 billion vs. $221.1 billion). And theUnited States had friendly relations with 12 of the 13 countries (which included anotherNATO ally, Turkey, as well as South Korea andIsrael). Finally, the combined defense spend-ing of the remaining “axis of evil” nations(North Korea and Iran) was about $8.5 billion,or 2 percent of U.S. defense expenditures.From a three-year historical viewpoint, non-U.S. global defense expenditures increasedfrom $541.8 billion in 2001 to $617.9 billion in2003 (in constant 2005 dollars), or 14 percent.During the same period, U.S. defense expendi-tures increased from $335.9 billion to $422.5billion (in constant 2005 dollars), or 26 per-
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In 2003U.S. defenseexpendituresexceeded thecombined defenseexpenditures of the next 13countries.
0.050.0100.0150.0200.0250.0300.0350.0400.0450.0
     U    S    A     R    u   s   s     i   a    C     h     i   n   a     F   r   a   n   c   e     J   a   p    a   n     U     K    G   e   r   m   a   n    y      I    t   a     l    y     S   a    u    d     i     A   r   a     b     i   a     I   n    d     i   a    S   o    u    t     h      K   o   r   e   a    A    u   s    t   r   a     l     i   a     T    u   r     k   e    y      I   s   r   a   e     l     R   e   s    t    o    f     t     h   e     w   o   r     l    d
Figure 1Comparison of 2003 Defense Expenditures
$ Billion
Source: IISS,
The Military Balance 2004–2005
(London: Oxford University Press, 2004), pp. 353–58.
 
cent, nearly twice as much as the rest of theworld.
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Or put another way, U.S. defensespending went from 38 percent of the world’sdefense spending in 2001 to 41 percent in2003. If those growth rates (approximately 4.5percent annually for the rest of the world and8.5 percent annually for the United States)were sustained, in 10 years U.S. defense expen-ditures would nearly equal what the rest of theworld combined spends.The six-year trend shows that U.S. defenseexpenditures grew from $338.1 billion in 1997to $422.5 billion in 2003, while the rest of theworld’s defense expenditures fell from $656.0billion to $617.9 billion (in constant 2005 dol-lars) during the same period.
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In other words,U.S. defense expenditures grew at about 4 per-cent per year while the rest of the world’sexpenditures declined about 1 percent annual-ly. If the six-year trend is used, U.S. defenseexpenditures will exceed those of the rest of the world combined in eight years. Although itis impossible to accurately predict futuredefense expenditures, it is probably safe to say that the United States is on track to outspendthe rest of the world combined sometime dur-ing the next 10–20 years, especially if thelonger-term trend is declining defense expen-ditures for the rest of the world.Is such a large defense budget necessary toprovide security against the threats theUnited States faces? Is such spending neces-sary to fight the war on terrorism?
The 21st-Century ThreatEnvironment
U.S. defense spending should be put in per-spective relative to the 21st-century threat envi-ronment. Since the demise of the Soviet Union,the United States no longer faces a serious mil-itary challenger or global hegemonic threat.President Vladimir Putin has charted a coursefor Russia to move closer to the United Statesand the West, both politically and economical-ly, so Russia is not the threat that the formerSoviet Union was. Indeed, Russia now hasobserver status with NATO—a dramaticchange, given that the NATO alliance was cre-ated to contain the former Soviet Union. Andin May 2002 Russia and the United Statessigned the Strategic Offensive ReductionsTreaty (SORT) to reduce their strategic nucleararsenals to between 1,700 and 2,200 warheadseach by December 2012. According to IISS,“despite disagreement over the U.S.-led actionin Iraq, the bilateral relationship betweenWashington and Moscow remains firm.”
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 And even if Russia were to change courseand adopt a more hostile posture, it is not ina position to challenge the United Stateseither economically or militarily. In 2003Russia’s gross domestic product was a littlemore than a tenth of U.S. GDP ($1.3 trillion vs. $10.9 trillion).
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 And although a largershare of Russia’s GDP went for defenseexpenditures (4.9 percent vs. 3.7 percent),
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inabsolute terms the United States outspentRussia by more than six to one. So Russia would have to devote more than 20 percentof its GDP to defense—which would exceedwhat the Soviet Union spent during theheight of the Cold War during the 1980s
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—to equal the United States.Certainly, Chinese military developmentsbear watching. Although many observers seeChina as the next great threat,
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even if China modernizes and expands its strategic nuclearforce (as many military experts predict it will),the United States will retain a credible nucleardeterrent with an overwhelming advantage inwarheads, launchers, and variety of delivery  vehicles. According to a Council on ForeignRelations task force chaired by former secre-tary of defense Harold Brown:[T]he People’s Republic of China is pur-suing a deliberate and focused course of military modernization but . . . it is atleast two decades behind the UnitedStates in terms of military technology and capability. Moreover, if the UnitedStates continues to dedicate significantresources to improving its military forces, as expected, the balance betweenthe United States and China, both glob-ally and in Asia, is likely to remain deci-
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Russia wouldhave to devotemore than 20percent of itsGDP to defenseto equal theUnited States.
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