Clinton's Defense Spending Redux

Max Sawicky sawicky at
Thu Aug 19 08:23:24 PDT 1999

Got some new budget numbers the other day and noticed that my statement that Clinton's defense outlay proposals are a cut in real terms is more vulnerable to expectations of inflation than I had appreciated.

To say the Clinton budget contemplates a real cut in defense relative to FY1999, one has to stipulate an annual (defense) inflation rate of no less than 3.2 percent. The Clinton numbers do reflect a small cut (aggregate of $42 b over ten years) relative to what they define as "current services," and current services is supposed to be no more than an inflation adjustment. But their adjustments exceed their own projections of the both the GDP deflator and the CPI. So to believe the Clinton budget cuts over the decade, you have to believe defense inflation will not exceed 3.2%.

If you think procurement prices will push up because of the usual contracting diseconomies for which DoD is famous, then you could say that defense inflation will indeed be high and Clinton is not really proposing a real increase. Alternatively, you could discount any validity to defense prices and consider outlays in terms of foregone spending or tax cuts, from which standpoint a general price index of some type (CPI or whatever) would be appropriate. In this sense, the Clinton budget would reflect an increase in real terms.

If you assume just two percent inflation for the next ten years (a lower bound, I'd say), then it would be accurate to say the Clinton budget proposes a $110 billion increase in defense over ten years (i.e., $11b a year). I myself would not call this a "large" increase, relative to the base amount in FY1999 ($283b), and in the grander scheme of things (the overall budget, the surplus, the GDP) it is much less "large," but it would be correct to call it an increase.

stumbling toward the light,


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