China already outspends US military? Discuss

The trope that the U.S. outspends the next 10 countries in defense combined regularly gets trotted out to explain why defense spending might go lower. The U.S. can limit defense spending and still meet our national security needs is the argument that resounds in the halls of OMB and the appropriations committees.

In popular terms, the case is made that we can buy more butter and fewer guns and still be safe. National security advocates often counter this with the somewhat thin argument that we must spend more because the U.S. has more interests than anyone else in more places around the world. What if these arguments and the basic assumptions on both sides are mistaken? What if we are not spending more and are achieving less value from what we spend than our adversaries?

The first data point in this journey of discovery comes from the Stockholm International Peace Research Institute (SIPRI) that adjusts the “official” Chinese defense spending of $184 billion to $252 billion. Then things get interesting. This month the Economist published an analysis based on a defense purchasing power parity (PPP) methodology developed by an Australian professor that is similar to other algorithms used to compare country GDPs…

The Economist calculates that real Chinese spending in 2020 is $518 billion — double SIPRI’s estimate. In 2021, China says it plans to increase its defense budget by 6.8%, which would raise this estimate to around $550 billion. That would still leave the U.S with a more than a $190 billon annual cushion…

“We spend $1 billion more on Medicare in the defense budget than we do on new tactical vehicles. We spend more on the Defense Health Program than we do on new ships,” Brown wrote. “In total, some $200 billion in the defense budget are essentially for non-defense purposes.” Even McCain would have been flabbergasted by the scale of this number.

Removing this $200 billion of non-defense spending from U.S. defense spending would leave the effective rate of U.S. defense spending below the Chinese estimate, at around $540 billion. On top of that, DoD doesn’t spend all of its money due to misguided appropriations and budget rules and is now leaving around up to $20 billion each year on the table that is eventually returned to the Treasury. So, the Chinese spending equivalent of $550 billion which continues to rise over 6% each year is significantly above the actual U.S. spending rate of around $520 billion that in the current best case will struggle to keep up with inflation. Bottom line: time is not on America’s side.