The Department of Defence from the Federal Budget - Essay Example

TERM PAPER PROPOSAL Appropriation of The Department of Defense From The Federal Budget By: Michael T. Mackhanlall EC301 Introduction on the Defense Budget In this article I will provide an overview of the appropriation of the Department of Defense (DOD) from the federal budget. I will begin with brief background information and will present and compare defense budgets of several nations and discuss the implications of the US defense budget. The similarities and differences of the national budgets and national defense spending will be discussed in a broader context considering US defense agenda. The concept of defense economics will be discussed and I will also analyze how these concepts could be used for efficiently allocating and planning resources which are under the Department of Defense and Defense authorities. According to the Department of Defense, the Bush administration in the US has fought the war on terror on the offensive to counter any proposed, planned terror attacks and to uproot terror camps in places such as Afghanistan and Iraq. The Defense department has claimed that the US military has been able to remove threats to US security in Afghanistan and Iraq and has liberated 50 million people of these countries. The Defense department has also claimed that it has raised pay levels for US service men and women and the rise in pay levels has been 21% with expanded targeted pays and bonuses. The military personnel and their families are also provided with better services and housing through new constructions and privatization. The defense budget has also shown an increased spending by 26% and this has been able to transform the Nation's defenses with the largest increase in military spending recorded since the Reagan administration. To improve readiness rates, transformational and joint training program has also been launched in the defense department with increased research and development funding by 56%. The Defense department has also claimed that there has been doubled investments in missile defense systems and the first ever land and sea based systems have been deployed (provided by the Department of Defense statement, 2005). The US defense agenda thus seems to be based on a war on terror, improving housing quality of military personnel, increased research and development in defense sectors, and increased pay for military personnel. The Department of defense gives further arguments in favour of an increased defense budget since the time of Reagan's presidential administration. According to the Department of Defense, the following reasons of Defense spending have been advanced. According to the Department of Defense, the Bush administration's agenda and defense spending - advances and promotes US' ongoing efforts in the Global War on Terror; provides for $401.7 billion of Defense Department's base budget, and this indicates an annual increase of seven percent, for a total increase in defense spending of 35 percent since 2001; makes considerable progress in transforming the Department to meet new threats and prepared to face new challenges; and continues improvements in the quality of life for US military personnel and their families by providing them with higher pay and better homes. (Department of Defense, 2005) Global war on terror and the need to meet new threats seem to have shaped the defense budget and increased defense spending to a whopping $401.7 billion with an annual increase of 7% and a total increase of as high as 35% since 2001. In comparison, China's Defense budget has also increased from $22 billion to nearly $30 billion in 2005. Thus although US defense spending seems to have shown a steady rise since the September 11 attacks in 2001, China's defense budget has shown drastic increases after 2002. China's defense spending may have been attempting to keep pace with other countries and defense budget has increased by 12.6%. China's defense spending is higher than that of Taiwan, India or South Korea. Although China's defense spending is comparatively less than the US defense spending, there has been a steady rise in its spending. In case of South Africa on the other side of the spectrum, Defense budget was much less at $3 billion in the 1980s, with $3.43 billion before the 1990s. South Africa, unlike most countries have shown a reduction in defense spending since the 1990s. The fact that the US defense budget is the highest among all other countries, points to the US agenda for the immediate future, which in turn focuses on military action for war on terror and all perceived threats. This has several implications for US national politics, sociology and worldwide global politics in general. Budget Making Procedures In this second section I will provide a detailed explanation of the procedures involved in the making of Defense Budget and the processes through which annual defense budgets are completed will be discussed along the role of the president, state representatives and state agencies in making the budget. The roles and responsibilities of the committees involved would be highlighted. These committees include Senate Appropriations Committee, Quadrennial Strategic Review, Pentagon Annual Strategic Review, and House of Representatives. The Department of Defense and the Defense Secretary propose their own financial budget or spending agenda and expectations to the President according to the specifications of the Pentagon Annual Strategic Review which is then forwarded to the the office of management and reviews for approval (Karp, 2005). The matter is then taken up by the Congress as the President seeks the approval of members in the form of a Budget proposal. The authorization and appropriation is sequential and handled by the House and the Senate. Appropriation allows the respective departments to move ahead with implementation programs. The House and Senate review the President's Budget request and representatives and Senators resolve any differences in the budget proposal as approved (Rogers, 2004). Senate vote is thus an important part which finally grants or rejects the President's request. Although the processes involve President's initial approval, defense budgets and other spending being also proposed by the President himself, the president has an influential role in increasing or decreasing and shaping up the budget plans. History of US Defense Spending In this section I will explore the national trends in defense spending and will analyze whether defense spending has increased or decreased proportionately in recent years. The analysis will consider the size of funding and to what extent if at all, there has been an increase in defense spending in the US as also in other countries. Factors such as readiness for spending, procurement, emerging threats that have shaped the US defense policies and problems associated with the chunk of spending from national revenue are discussed here. The factors influencing defense spending are considered here in some detail. The United States has spent $295 billion in defense in the year 2001 that has increased steadily by 7% annually with a steady rise of 35% in defense budget by 2005 since 2001(Washler, 2002). Since the Cold War period of 1980s, there has been a massive increase of up to 83% on defense spending and defense spending of $401.7 billion seems to have reached its peak by this year, spending limits being unprecedented suggesting a rise by 26%, more than that seen in the Reagan administration when defense spending was comparatively high. The US military spending on Defense budget as a percentage of GDP since 1940 is given below Table: US military spending as a percentage of GDP, 1940--2003 Fiscal Year Military spending as percent of GDP 1940 1.7 1941 5.6 1942 17.8 1943 37.0 1944 37.8 1945 37.5 1946 19.2 1947 5.5 1948 3.5 1949 4.8 1950 5.0 1951 7.4 1952 13.2 1953 14.2 1954 13.1 1955 10.8 1956 10.0 1957 10.1 1958 10.2 1959 10.0 1960 9.3 1961 9.4 1962 9.2 1963 8.9 1964 8.5 1965 7.4 1966 7.7 1967 8.8 1968 9.4 1969 8.7 1970 8.1 1971 7.3 1972 6.7 1973 5.8 1974 5.5 1975 5.5 1976 5.2 1977 4.9 1978 4.7 1979 4.6 1980 4.9 1981 5.1 1982 5.7 1983 6.1 1984 5.9 1985 6.1 1986 6.2 1987 6.1 1988 5.8 1989 5.6 1990 5.2 1991 4.6 1992 4.8 1993 4.4 1994 4.0 1995 3.7 1996 3.5 1997 3.3 1998 3.1 1999 3.0 2000 3.0 2001 3.0 2002 3.4 2003 3.7 Data source: Historical documents. 2005 From the table, we can see, military spending of US has been the highest when considered as a percentage of GDP in the years 1943 to 1945 during the Second World War. After a period of considerable low defense agenda, defense spending again increased for US from 1952 through 1959 and was above 10% of GDP. There was again a steady decrease in defense spending as a percentage of GDP after the 1950s and at present US military spending is found to be a little above 3.7% of GDP. US military spending has relatively or comparatively decreased but there have been major increases in the amount of money spent on defense expenditures and agenda since the 1940s. The US defense military spending as considered a percentage of discretionary spending, the following table gives the percentage of military spending as compared with other discretionary spending of the US government since 1962. US military spending as a percentage of discretionary spending, 1962--2003 Fiscal Year Military spending as percent of discretionary spending 1962 72.9 1963 71.3 1964 69.5 1965 65.6 1966 65.4 1967 67.6 1968 69.6 1969 70.5 1970 68.1 1971 64.5 1972 61.7 1973 59.1 1974 58.4 1975 55.5 1976 51.2 1977 49.5 1978 47.8 1979 48.7 1980 48.7 1981 51.3 1982 57.0 1983 59.4 1984 60.1 1985 60.9 1986 62.4 1987 63.6 1988 62.6 1989 62.2 1990 60.0 1991 59.9 1992 56.7 1993 54.2 1994 52.1 1995 50.2 1996 49.9 1997 49.6 1998 48.9 1999 48.2 2000 48.0 2001 47.1 2002 47.5 2003 49.0 Data source - Historical documents, 2005 In 1962, as seen from the table, defense spending was as its highest when compared with other types of discretionary spending. This had steadily decreased in the 1970s and had again increased by the 1980s, Cold War era. The 1990s, have seen a considerable decrease in defense spending with the percentage of military spending as compared with other discretionary expenditures at 49% in 2003. Effects of the Defense Budget on US Economy Finally we provide a critical analysis of the defense budget and defense spending by the government and examine how the budget affects the US economy. The impact of the budget and changing patterns or extent of defense spending is analyzed according to the condition and structure of the US economy and whether the economy is affected in any way. In this context we discuss the aggregate factors that combine as a result of the spending and we will examine concepts of debt ceiling, federal deficit, and the employment/unemployment rate. The defense budget has seen a considerable increase in spending as far as gross values of the money spent or financial statements are concerned. The budget was much less than $401 billion than it is today and there has been a considerable rise in the budget since the Reagan administration used specifically on defense spending. This trend has followed from the Cold war although there was a sudden decrease in defense spending in the 1990s. As indicated from the tables here the percentage of defense spending has comparatively decreased compared with the 1960s and 1940s. Yet as seen in cases of China, South Korea or South Africa, US defense spending seems to have increased drastically and is markedly higher than all other countries' defense budget. This sudden increase in defense spending by the US when compared with the financial reports of other countries has been justified as necessary to counter threats and fight on the war on terror as seen from US' increased military presence in the middle east. This however seems to have weakened the US economy considerably and has had major social and political opposition and impacts (Baker, 2004). According to Policy Research and Analysis, federal spending has shown tremendous increase reaching the $20,000 level per household. This has happened for the first time since the World War II. Most of this amount has been collected as federal taxes with the possibilities that taxes would rise by an extra $2500 per household in the coming years. Federal spending collected as taxes have been found to be used mainly for defense spending and social security (Riedl, 2003). With higher taxes, there were rising unemployment claims that jumped by 132 percent to $56 billion during the 2001-2002 recessions. This has continued to increase until 2003 after which there has been slight improvement in employment levels since the end of 2004. Conclusion: In this essay we discussed the impact of defense budget and military spending on US economy highlighting the comparative emphasis on defense, US' foreign policies on terror and the changing levels of federal taxes and employment. 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Budget Cuts Hit Defense Stocks; Pentagon Plan to Pare Costs Depresses Some Providers. The Wall Street Journal. Retrieved 13 September 2005, from the World Wide Web: http://proquest.umi.com/pqdwebdid=79012681clientid&sid=PQD.htm Karp, Jonathan (2005b, February 8). The Bush Budget Proposal: Pentagon Request May Set Off Turf Battles. The Wall Street Journal. Retrieved 15 September 2005, from the World Wide Web: http://proquest.umi.com/pqdwebdid=79012681&sid=PQD.htm $20,000 per Household: The Highest Level of Federal Spending Since World War II Brian M. Riedl, 2003 Policy Research and Analysis http://www.heritage.org/Research/Budget/BG1710.cfm Hesse, William. (2000). Defense Spending Down. Connecticut Department of Labor. Retrieved September 19, 2005 from the World Wide Web: http://www.ctdol.state.ct.us/lmi/misc/cedaug96.htm Read More