Many European countries are finally talking seriously about spending on national defense after slacking for too long because of the American security umbrella. Too often, however, politicians have been pitching these overdue investments as jobs programs that will boost domestic economic growth.
As a result, from the United Kingdom to Germany, they’re not leveling with citizens about the trade-offs that will be required to prepare for the wars of the future. This casts doubt on the sustainability of commitments to spend 5 percent of gross domestic product on defense, something all but one member of the North Atlantic Treaty Organization — Spain — has pledged to do by 2035.
More state spending rarely creates lasting economic growth. A new study this week from the International Monetary Fund tracks defense spending across 164 countries since World War II. While increases tend to lead to a short-term bump in GDP, the report finds that national finances deteriorate over the medium term.
On average, the authors conclude, “deficits worsen by about 2.6 percentage points of GDP, and public debt increases by about 7 percentage points within three years of the start of a boom.”
Why does a more active defense sector lead to strained public finances? Rather than cutting costs in areas like health care or welfare to fund a bigger defense budget, most governments decide to skip hard spending choices and fund buildups through borrowing. Running up huge deficits in wartime is much more defensible than doing so in peacetime.
Deficit-financed militaries are rarely viable or sustainable, and they certainly don’t provide long-term revenue for the state.
The United States doesn’t have a clean nose. Very few politicians in either party are trying to tackle the $39 trillion national debt. Doing so will require reforms at Social Security, Medicare, Veterans Affairs and other entitlement programs.
President Donald Trump is right to propose a $1.5 trillion defense budget and launch crash programs to revitalize the defense industrial base, but economic growth is ultimately the only way to reach spending commitments consistently.
If the U.S. rides the AI boom, rather than throttling it, the country will be able to afford a military big enough to face the grave and emerging threats of the 21st century.
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