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I've heard this stated several times before.
However, I have some doubts as to whether the ratio of military spending to GDP tells the whole story about the economic impact of that military spending.
First off, wasn't US military spending during the Fifties and part of the Sixties mostly pay-as-you-go and mostly taken directly out of taxes? This clearly started to change as the war in Vietnam grew and grew and LBJ started to pay more and more of it with plastic. In our current situation the war in Iraq is completely paid for with debt. This has to make a big difference.
Though it may not have a huge effect on the absolute size of the GDP, I think it's well to remember that a not insignificant fraction of the GDP includes military spending itself. So, to some extent an increase in military spending increases both the numerator and denominator of the military spending/GDP ratio (though of course not by the same proportion). The war in Iraq actually increases our GDP, and I'm sure some economists would find that beneficial. Do you?
While I can't point to any concrete evidence and I make no claims of expertise in this sort of thing, I just have a gut feel that the nature of the entities that comprised the US GDP in say 1956 were of a much more substantive and generally healthier nature than the entities that comprise the GDP today. The structural differences between an economy largely based on domestic manufacturing then vs the debt-ridden service economy and financial shananigans we have now surely must count for something. Or maybe it doesn't?
Do you really think the US economy right now could absorb the cost of another $500 billion+ Iraq war without dire consequences?
Agree that the whole economy is quite different now, and not in a good way for the U.S. We were still on the upslope of Hubbert's Peak. We were still making stuff other nations wanted to buy.
Something like 30%-40% of tax revenue came from corporations. Now they are all incorporated overseas, leaving individuals to foot the bill. Only 7% of revenue comes from corporate taxes now.
Today's NYT:
You forgot to add the cost of a wholly retrofitted private auto fleet with an eye for a changeover to primarily plug in diesel-electric hybrids running on biodiesel. I daresay that 1.2 trillion would still have enough left over for at least a part of that project.
Yes, I think the U.S. economy right now could absorb the cost of another $500 billion+ Iraq war without dire consequences. Note that the consequences of the Iraq war have been mainly beneficial for the economy as a whole. Why? Because the increased spending had a multiplier effect (just like Econ 101!) and stimulated the economy to the point where unemployment is near a forty-year low.
The U.S. economy is huge. In the very very long run, being a colonial power is a drain, as ancient Rome found out. But the expansion of Rome went on for hundreds of years, and its "decline" also took hundreds of years.
Thus I think it is a big mistake to look to concepts such as entropy for elucidation of current issues in U.S. military spending--which is low by standards of the past sixty years.
I ran across an interesting little stat a while ago. If you add up our military expenses since WW2 it is almost exactly equal to the national debt, around $10 trillion. So it seems reasonable to me to say that of all the money we've spent on the military, we haven't paid for one red cent of it. (and we never will)
Well if you add up all the interest paid since 1946 it is much more than ten trillion. Like my Granddaughter, if you keep it up the intrest will soon be greater than your income.
Yes but in the high tech twenty first century every year is a decade, or even more than a decade. Entropy is exponentially faster, and empires look almost like claymation compared to ancient Rome.
A would also add that in 1956(say) when the Military bought something, chances were that it was MADE by an American who took that paycheck home to support his Not-working wife and spent it in HIS community.
I wonder what percentage of the military spending is on something MFG'ed out of the country?
" the war in Iraq is completely paid for with debt."
Actually, not really. The current nominal federal deficit is about $250B. If you subtract about $200B for inflation's effects on our outstanding debt (2% inflation and $10T in debt) you have a net, real deficit of only $50B, or less than 1% of GDP, and maybe 9% of military spending. That may have a lot to do with the current economic slowdown, BTW.
Actually, Japan has a much larger government deficit, as a % of their GDP.
Key difference is that Japans government borrows from it own people whereas the US is mostly borrowing overseas today. So it is likely less sustainable. Given the state of the Japan economy over the last 2 decades I really think that if you have bring them up as a comparison you are in a bit of trouble.
"Given the state of the Japan economy over the last 2 decades I really think that if you have bring them up as a comparison you are in a bit of trouble."
But that’s just the point: we’re not doing so badly compared to the Japanese. Their economy has stagnated for a long time due to excessive savings, while the US economy has grown perhaps 50% ( albeit while accumulating excessive foreign debt).
Time will tell.
Oh, heck, I'm not saying things will go perfectly smoothly for the US. I'm just not sure that the US compares badly to the Japanese, who among other things are about 90% dependent on FF imports for energy(they use oil for most electricity generation!), while the US is only about 30% dependent overall.
http://www.tekes.fi/tapahtumia/densy/Tanaka.pdf
about 18% of electricity generation (TWhr) in Japan is oil fired, according to the above.
http://www.cslforum.org/japan.htm
about 60% of all electricity from thermal generation, including coal and gas. They are expanding their nuclear sector quite rapidly.
Energy efficiency is a priority in the Japanese economy. They are the most energy efficient large economy, which is particularly interesting given they have a harsh climate, and are the most industrialised of the advanced industrial states (other than South Korea).
They are certainly ahead of the US in securing contracts for, and building infrastructure for, long term LNG imports.
It would be a gross oversimplification to say the problem with the Japanese economy is it has 'too much savings'. Actually Japanese consumers (now) have very low savings rates: a little heralded transformation from the late 80s.
What you have in Japan was a broken system for investing capital: the banking system was not making efficient loans, nor were companies investing efficiently.
There are significant signs the same thing has occurred in the US housing finance market (although not on the scale of the Japanese bubble of the 1980s). It will be interesting to see how it plays out.
hmmm.
This is part of the reason I post: learning new things.
So the Japanese only save about 3% now. Wow.
Only 40% of generation from oil & gas? That's not too bad. Of course, it's all imported.
They're pursuing solar (and nuclear) pretty aggressively. OTOH, they don't know what to with wind, what with small disconnected grids that make balancing load & demand hard.
Anyway, my point was that we shouldn't make simplistic comparisons with other countries. The US has problems, but other countries do too.