Procurement: August 26, 2005


With the U.S. defense budget headed north of $400 billion a year, and accounting for nearly half the military spending on the planet, youd think that records were being broken. Well, they arent. As a percentage of GNP, military spending continues a decline that has been going on since the 1960s (when, because of the Vietnam war, defense spending was 10.7 percent of GNP). That went down to 5.9 percent of GNP in the 1970s and, despite a much heralded defense build up in the 1980s, still declined in the 1980s (to 5.8 percent.) With the end of the Cold War, spending dropped sharply again in the 1990s, to 4.1 percent. For the first decade of the 21st century, defense spending is expected to average 3.4 percent of GNP. Most of the current defense budget is being spent on personnel (payroll and benefits), and buying new equipment to replace the Cold War era stuff that is wearing out. The procurement needs are heavier than usual because during the 1990s, procurement was cut to about 15 percent of the defense budget, instead of the usual 25 percent. This was to be part of the post-Cold War peace dividend. But then September 11, 2001 came along and the peace ended. Not only that, but the remaining post-Cold War forces would have to get their decrepit gear replaced anyway, and now that is being done, although with a smaller (than during the Cold War) armed forces. Another reason the defense spending, as a percentage of GNP, keeps going down, is because the economy keeps growing at a fast rate. Americans are spending more money on more things, but less of it on defense. 


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