See? It's Not defence Spending That's Bankrupting The USA...

Aircraft CarrierSure, these cost a lot. But not as much as Medicare.

As the United States slowly faces up to the fact that it’s spending way beyond its means, both sides are shouting back and forth about what the problem is.Here’s what the problem is:

The problem is that our entitlement spending is out of control.

But folks who benefit from our out-of-control entitlement spending cast lots of votes, so neither side has the balls to admit that.

Instead, both sides grab on to their favourite “discretionary” spending pet peeves and scream that we need to start cutting such spending immediately.

One favourite budget line item that Democrats love to scream about, for example, is defence spending. The war-loving Republicans’ commitment to a huge military, this story goes, is bankrupting the country.

But is that true?

No, it isn’t.

We certainly spend way more on defence than we can afford to, and if we are ever to get serious about balancing the country’s budget, we’re almost certainly going to have to cut back on defence spending.

But our defence spending actually isn’t way out of line relative to the amount we’ve spent on it in the past (as a percentage of GDP). And it’s actually not out of line when you look at “troops per capita” and other measures that take into account the relatively big size of this country.

How do we know this? By reading Kleiner Perkins’ partner Mary Meeker’s excellent analysis of the financial condition of the United States.

One section of the analysis is devoted to defence spending.

defence spending has grown as a percentage of GDP over the last 200 years, but the reason we're bankrupt is all the other spending we've added in the past century.

Sure, our recent wars have pumped up defence spending. Wars cost a lot. (But at least we're now including them in the budget, which we didn't in the last administration).

In fact, our wars have cost us about $1 trillion in the past 10 years. Yikes!

But even with those wars, defence spending is still below its average as a per cent of GDP for the past 60 years

Everyone howls about how much we spend on defence relative to other countries. And that's true, in absolute dollars. There we are at the right--off the charts.

And we also have a lot more troops than most countries, though not as many as China. (Think about that next time you howl about how we're not taking a hard enough line with China on trade).

So, in short, yes, we're spending a BOATLOAD on defence, more than any other country. But we're still spending less as a percentage of GDP than we have over the past half-century. So defence spending is not what's bankrupting us.

Which isn't to say that we shouldn't cut our defence budget anyway. We can't afford what we're spending. And Lord knows that our defence spending could be a lot more efficient...

And now see what's REALLY bankrupting the United States...

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