Are we living in 1980s Soviet Union, fiscally speaking?

Great Debates
1

One of the core narratives of the Soviet Union’s fall seems to be this: terrified of a mliitary threat presented by their enemies, they neglected their economy in order to pump all their resources into a military buildup. Eventually their economy couldn’t sustain the pressure, and the Soviet Union collapsed. (References for this narrative upon request–I think it’s fairly common knowledge).

That narrative may be problematic–some folks think the Soviet Union would have collapsed even without Reagan’s wild-eyed military threats, for example.

However, I can think of a country in modern times that devotes a tremendous portion of its GDP to its military, resulting in a military budget bigger than the rest of the world’s militaries combined, with one of the highest military budgets as percentage of GDP in the world (and IIRC the highest if you exclude dictatorships and nations fighting wars on their own soil). And this country is facing a serious threat to its fiscal welfare, and is destroying its own infrastructure in order to maintain its huge level of military spending.

Is this parallel valid? It seems to me that if we cut our defense budget by 75%, we’d still be among the biggest militaries in the world, and our military would be unquestionably big enough to defend our borders from any conceivable threat long enough for us to build up to a larger force if necessary (as we did during WWII); that budget-cut would save about half a trillion dollars a year, eclipsing anything that the supposedly fiscally-responsible Tea Partiers have proposed. This might be what we need to do if we’re serious about ending our budget deficits.

Yes, there would be trade-offs. Our European allies might well need to expand their militaries to compensate. I say it would be worth it.

Otherwise, we might be approaching our own less salutary 1991.

2

The US spends about 4.7% of GDP on defense. The Soviet Union was spending about 17% of GDP on defense out of a much smaller GDP. Cutting defense spending is probably a good idea, but defense spending would probably have to quintiple before the US faced a similar threat as the Soviet Union did.

3

I think we spend too much on defense, and there would be little downside to cutting back.

That said, despite the general perception, over the last 60 years the general trend has been to spend less and less on defense and more and more on social spending programs (a good thing, IMHO). The idea that our spending is spiraling out of control is not really supported by the facts.

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4

When the Soviet Union collapsed they were spending something like 15-20% of their GDP on the military (compared to the 5-6% the US was spending at the time). And even at that the US was spending more in absolute dollar terms.

Today, I think that, as a percentage of GDP, the military is still far below the 15-20% the Soviets were spending (I think the US spent something like a trillion, all told, for the military in 2010…which would be under 10%, since our GDP is over $14 trillion).

So…no…we aren’t anywhere close to where the Soviets were in the 1980’s, financially speaking.

Having a large military really isn’t the key issue. It’s having a capable military…capable of doing what we, a major world superpower, need it to do. So, deciding what can or can’t be cut you have to start with…what do ‘we’ need our military to do? To act as simply a defense force? Yeah…we could cut our budget by 75% (or some other arbitrary amount) and be fine. To protect our overseas interests? Which interests? Which allies? What’s the definition of ‘protect’? What’s the possible range of missions?

You would need to determine all those things (plus a bunch more, such as the fact that a large percentage of the budget goes to paying the troops salaries and benefits, housing and food, clothing and training, etc etc) to get a real answer to this…and where you would have to start is defining exactly what you want (or think) the military to do, what role you want them to play, and what potential missions you might want to send them on. In some ways, you have to be able to accurately predict the future, especially if you want to cut the military back to the bone and beyond, because if it turns out you did in fact need them to do something beyond what you predicted you are basically fucked…you simply can’t hand rifles to some guys and send them to the front these days. Just building the logistics capabilities, if you let them lapse, could take years. Continued weapons development, if you stop doing it, could take years to reconstitute. Equipment maintenance, if you let it lapse (and cutting 75% from the budget pretty much means you will be cutting ALL these things) could take you years to fix or replace the equipment. And the list goes on and on.

-XT

5

I think the OP is correct about the threat, but wrong about the source of the threat. If anything does us in, it will be entitlement spending, not defense spending.

Handy dandy chart.

I’m open to trimming defense, but without getting a handle on entitlement spending we are cooked. These costs are rising and there won’t be tax revenues enough to pay for them unless the programs are reformed in some way.

Everyone from Paul Volcker to Ben Bernanke to the President’s Deficit Commission have raised the alarm on this. They did not focus solely on defense as the bugbear here, and we shouldn’t make that mistake either.

6

Soviet Union in the 1980s or Greece in the 2010s? I hope those aren’t the only two choices… :slight_smile:

7

American’s always think the sky is falling when we have a downturn. I predict we will start getting threads on the price of oil going up soon, and how gas is now $x per gallon (and it’s THE END OF THE WORLD!!! :eek:)…

And when American’s start worrying that the sky is falling, they look for places to cut the budget for all the useless stuff (to them) that we don’t need…while, of course, getting all fierce and protective over the stuff they know we definitely all need. If you are a left winger, the knee jerking response is to look at the Defense budget and say ‘well hell, we don’t need all that stuff…let’s cut the budget!’. If you are a right winger you look at Social Security or Medicare, or all of the entitlement programs and say ‘well hell, we don’t need all that stuff…let’s cut the budget!’. Me, I look at the budget and say ‘how the hell are we going to pay for all this stuff, and how the hell are we going to get the left and right wingers to agree that we need to make cuts from all of their sacred cows???’.

I haven’t figured out the answer to that last one yet. What generally happens is that since no one can agree on what needs to be cut, we end up with superficial cuts that are purely symbolic, and push the problem into the future, hoping someone else will figure out the answer…

-XT

8

AKA the Obama budget, in this phenomenon’s latest manifestation.

9

You’ve got a point that social security and medicare are a much larger part of the budget. But there is a major difference between defense spending and social security/medicare.
If the Pentagon goes out and buys a tank, that tank doesn’t produce more goods* to further the economy or quality of life. If Medicare spends money on making a sick person well, that person can go back to whatever they do that contributes to the economy. Likewise, if social security goes out and spends money on a senior citizen, that senior citizen continues to contribute to the economy, even if they don’t have a job (i.e. there is some value to society in having senior citizens remaining alive.) In an economic sense, military spending is a disproportionate drain on economic productivity than other types of spending**.

[sub]*Goods here in the economic sense, not limited, and somewhat crassly including such ineffables as “quality of life.”

**Obviously military spending of zero leads to a drastically different outcome, possibly Lilliputians assembling an invasion force a la The Mouse that Roared. Nations must maintain some form of military to survive, but I think it’s safely said that the U.S. military spending is mostly oriented towards being able to use the military on other continents and on the high seas.[/sub]

10

Um…does the Pentagon just pick the tank from the magic tank tree? And once picked, does the tank stay nice and fresh for ever? If not, then someone had to build the tank (someone with one of those job thingies). Actually, lots of someones. And once built, someone has to maintain the tank, to repair the tank, to upgrade the tank, to refurbish the tank and, well, use the thing. All of those someones have jobs, make money, pay taxes. The companies involved in manufacturing and maintaining, refurbishing and all the other stuff also pay taxes. Taxes that, you know, also pay for Social Security and Medicare. Plus, there is the dual benefit that having the tank might just discourage someone else from using their tanks against us or our interests, and that if we actually need the tank we will have it.

-XT

11

It’s not a question of magic. It’s called opportunity cost. The tank doesn’t contribute further to the economy in terms of productivity, only in terms of potential productivity lost should the lack of tanks lead to a war where Americans die and America gets invaded.

America might be better off, in an economic sense, if the resources and manpower that went into building the tank instead built a tractor that could then be used to grow food, or a subway car used to transport commuters, or a lathe used to make medical glassware.

In normal operation, the medical glassware, tractor, and subway car all contribute to further production in a way the tank does not.

12

Ah, but people also have opportunity costs! Every day an Air Force officer spends planning how we might bomb Iranian nuclear facilities is a day that s/he is not spending making the logistical arrangements for a air medical evacuation company or negotiating a communications equipment deal between corporations. Many of the people in the military are very talented and well-prepared for any number of roles in the civilian economy.

Looked at purely from the perspective of jobs gained per dollar spent, the military would be a terrible jobs program.

13

Nobody knows what we spend on the military. There are lots of black ops, CIa, NSA ,and other programs that don’t show a public budget. we have no idea and that don’t want us to know. Whose budget pays for the listening of American conversations and gathering info from the internet. Is the TSA part of the military budget?

14

Another “mission” of the military is not an obvious one: That of providing security to allies, in exchange for economic and political considerations. They range from the more conspicuous, implicit promises of support for US global initiatives and trade agreements, to less obvious, perhaps even “sub rosa” agreements such as we apparently struck with the Saudis: In exchange for security promises, they will maintain the dollar as the exchange currency in the oil markets. It’s been claimed that in a broader context, America’s military power is a significant factor in maintaining the dollar as the world’s reserve currency.

If accurate, given the economic value to the US in having the “universal currency,” a strong military might translate into a significant return on it’s military “investment.”

15

If we were getting our money’s worth out of these deals, nobody would make them with us: they’d defend their own damned borders and keep the trade benefits for themselves. The rest of the civilized world is getting a free ride on my dime, and I don’t appreciate it; I’d like it to end, please.

That said, the difference between Soviet military spending and ours is significant. I’m not sure it torpedoes the analogy, but it certainly weakens it. Entitlement programs, however, do not: those same democratic nations that get a free ride on our military dime have much larger entitlement programs than we do, and have for a long time, and they’re not all suffering.

16

To a certain extent I agree. I think the US does foot a large share of the military costs for The West, and that other countries are able to enjoy the benefits of more social spending on our dime.

However, the reality is that America really has a lot of overseas interests, and a lot of them are vital strategic interests that need to be protected. Our access to oil is one of them. Our access to trade goods is another one. Our access to other strategic materials are another. We have allies scattered throughout the world, some of who are also highly vital to our interests. So, bottom line is, if we didn’t do it, someone would have too…and I don’t see anyone stepping up to do that for us. Probably because we are still the wealthiest single country on earth, and pretty much everyone knows it, whether they be allies, neutrals, unfriendly or hostile. And they know that we HAVE to protect those interests, so they might as well hop on for the free ride on our dime.

No doubt. However, the military isn’t just a jobs program, and it’s not a waste of tax payer dollars. You see, without oil our economy completely crashes and we go back to the joys of 19th century living. Without trade our economy crashes and we go back to the joys of 18th century living. Without either we probably go back to the joys of hunting and gathering. :stuck_out_tongue: Currently, there is no one else who is going to protect our interests abroad, because there is no one capable of or has an interest in protecting them for us.

Assessing value is difficult, however. I mean, sure, we could spend the money we were going to spend on tanks to instead give better healthcare (using the OPs 75% that would be something like $700 billion, give or take)…and then find that we needed those tanks to protect our interests abroad. Sadly, now we are paying a lot for healthcare and we have no oil. Or trade to South Korea has been cut off, and with it trade to Japan has been interdicted and China has curtailed it because North Korea, seeing weakness on the part of the US military, has launched a war against South Korea that they will ultimately lose anyway, but which will completely disrupt the flow of goods and services to American.

I see it like this. During the reign of the British Empire, they could have chosen to not build any new ships for the Royal Navy, and let the old ones just rot away, and instead spent the money on, oh, say labor reform and better working conditions, higher wages and better healthcare. On the surface, the opportunity costs of spending the money on social programs might seem the better deal. I mean, Royal Navy ships of the line don’t contribute in terms of productivity (leaving aside all the people employed in gathering the materials, building and maintaining them). Lacking them, however, could potentially cost the British Empire the very wealth needed to maintain all those nice social programs and their way of life…would have, in fact, since it is a sure thing that someone, at some time would have taken advantage of the lack of a British Navy to project power and protect their interests. WE probably would have been among the countries taking advantage of this in fact, but we wouldn’t have been alone.

-XT

17

It’s worth noting another major difference between the US now and the Soviet Union in the years leading up to its collapse: The Soviet Union got bogged down in an unwinnable 9 year war in Afghanistan, while the US would never make that mistake.

18

Is it fair to assume that the populace of the USSR was much more unhappy with their government and that they were a deciding factor as well?

Spending a large chunk of GDP is one thing; having your citizens living under a crushing state that prohibited lots of freedoms is another factor to consider.

19

>>If we were getting our money’s worth out of these deals, nobody would make them with us: they’d defend their own damned borders and keep the trade benefits for themselves. The rest of the civilized world is getting a free ride on my dime, and I don’t appreciate it; I’d like it to end, please.<<

I apologize for this format. I haven’t figured out the “quote” system, yet.

However, is it accurate to say that, say, the Saudis are getting a “free ride on my dime?” Granted, we pay the big bucks for the DOD budget. But, in return, we get all the advantages of others recognizing “my dime” as the common currency. From what I understand from Econ 101, this translates into a rather significant benefit for us, not just as a nation, but also as individual citizens, in terms of interest rates, “cheap money,” etc.

What does it mean that the US $ is the reserve currency, and favored currency of exchange, for the world? If it weren’t, how would that manifest itself in our economic world? How would that affect the demand for the dollar, and hence the interest rates we presently see determining the cost of our money? And the ease, not to mention the lowered costs, with which we can borrow the money that we need? And, to this discussion, how, if at all, is this status quo a product, in part, of our military power?

It would seem to me that these considerations should be factored into the assignments of all the missions of the armed forces that we taxpayers must pay for.

20

xtisme, I think you’re confusing me with the OP in terms of how much I would cut the military. To be more specific, I looked up some numbers from Wikipedia and the US Navy’s website: http://www.navy.mil/navydata/fact_display.asp?cid=4100&tid=100&ct=4

Of the 22 aircraft carriers in service around the world, 11 are American and 7 more belong to American allies.

I propose we cut the US carrier force from 11 to 6.

Of the 89 nuclear attack submarines in service, 46 are American and 22 are Russian, 7 British, 6 French, 7 Chinese, and 1 Indian.

I propose that we cut the US nuclear attack submarine force from 46 to 30.

Of the 38 or 39 nuclear ballistic missile submarines around the world, 14 are American, 4 British, 4 French, 14 Russian, and 2 or 3 are Chinese.

I propose that we negotiate with the Russians to cut both American and Russian fleets to 10 nuclear ballistic missile submarines.
These cuts are closer to 30/40% than the 75% envisioned by the OP, and I would advocate similar cuts to the Air Force and larger cuts to the Army (because due to America’s situation, the Army is largely needed overseas, but not so much for the defense of America itself.) For example, of the US’s 10 active divisions and 5500 Abrams tanks, I think we could learn to live with 6 active divisions and 3200 tanks (cut the Army sometime after we get out of Iraq and Afghanistan, of course.) I suspect South Korea will be just fine since they have over 500000 troops and 2300 tanks of their own, and the US has had only about 30000 troops in Korea for the last four decades.
I don’t know exactly how much these cuts would save, but I suspect it’s well over $100 billion a year. Further cuts (such as cutting the C-17 and alternate engine for the F-35) would have to be made to get it up to 30-40% of the military budget since the budget is not proportional to operating costs.
It looks to me like we would still retain a significant military advantage over our potential opponents. I doubt these cuts would result in other nations cutting off American trade at sea, or North Korea deciding that America is too weak to defend South Korea (I also don’t believe for a moment that China would respond to a North Korean invasion of South Korea by cutting off American trade. China depends on that trade for its near-10%/year economic growth, and the Chinese leadership is afraid that without that economic growth, internal political dissent will reach problematic levels.)

As far as America’s access to overseas oil goes, America gets 3 times as much oil from Canada and Mexico as it does from Saudi Arabia (see the top oil exporters to the U.S. here from the EIA.
Tilley does have an interesting point about the advantage the U.S. gets from the dollar as a reserve currency, but I wonder what fraction of that advantage is due to U.S. military strength and not U.S. economic strength.
Does anyone know if economists have quantified the advantage the U.S. gets in interest rates from the reserve currency status of the dollar?
The U.S. isn’t at all in the situation of the USSR twenty-three years ago, but it probably can afford a smaller defense establishment - and if we’re serious about reducing the deficit, we’ll have to have a smaller defense establishment.