The Wall Street Waltz: 90 Visual Perspectives, Illustrated Lessons From Financial Cycles and Trends, Revised and Updated Edition

Chart 83

Defense Expenditures and the GNP

Worried that the recent rise in military spending will harm the economy? A look at this historical perspective of defense expenditures, showing military outlays relative to total gross national product, should allay your fears.

For several years, we've been bombarded with media reports about the Reagan administration's massive military buildup and the astronomical sums being appropriated for defense. In fact, Uncle Sam spent more on the military from 1982 to 1985 than in any four-year period since World War II, including the Korean and Vietnam Wars. In dollar terms, this raised last year's total defense outlays to $254 billion, roughly twice what they were when Reagan took office in 1980.

With statistics like these being bandied about, you can see why folks conclude that defense expenditures have gotten dangerously out of hand. Then they wonder whether this military spendup will seriously undermine the nation's economic health. But if you examine the issue dispassionately, you'll discover that the economic impact of the current buildup isn't nearly as great as most critics claim. The adjacent chart provides the evidence.

Surprising as it may seem, there's been a dramatic downturn in the portion of the nation's total output devoted to the military. During the Korean conflict, the percentage of GNP spent on defense reached nearly 14 percent, but by 1986 it was only 6.4 percent, less than half. Furthermore, recent Defense Department estimates ...