You are here

The US Defence Budget for 2008

Laxman Kumar Behera was Research Fellow at Manohar Parrikar Institute for Defence Studies and Analyses, New Delhi. Click here for detailed profile.
  • Share
  • Tweet
  • Email
  • Whatsapp
  • Linkedin
  • Print
  • February 21, 2007

    On February 5, 2007, President Bush presented his administration's budget for fiscal year 2008 (October 1, 2007 to September 30, 2008). Out of a total budgetary allocation of US $2.9 trillion for all sectors, $623 billion (21 per cent) was earmarked for defence purposes, including those for war efforts in various parts of the world. With the new budget, America's military budget has doubled since Bush took office in 2000 and is now higher in real terms than any other year in the last half-century. Given the fact that the US is the highest spender on military heads, an overview of the US budget will reflect the priorities in terms of resource allocation and the implications it will have on the global military expenditure.

    In the latest budget, provision has been made for the peacetime allocation of $481.4 billion for the Department of Defence's (DOD) base budget. Peacetime costs include the costs on salary, training, purchase and maintenance of weapons, mock war exercises and deployments. If the cost of the Global War on Terror (GWOT) is added, the total US military budget for FY 2008 goes up by $142 billion to a total of $623 billion. FY 2008's peacetime allocation is a 62 per cent increase over that of 2001. Out of the DOD's $481.4 billion budget, 38 per cent has been earmarked for strategic modernisation, 30 per cent for readiness and support, 28 per cent for military pay and healthcare, and the remaining 4 per cent for family housing and facilities.

    Besides the peacetime allocation, the 2008 defence budget provisioned huge wartime financial support to the Global War on Terror (GWOT). $142 billion have been allocated for the war in Iraq and ongoing operations in Afghanistan. This is besides the supplemental budget of $94 billion that Bush requested for 2007. With the new and supplemental budgets, Bush's GWOT from 2001 to the end of September 2008 will amount to $662 billion dollar, which in real terms exceeds the Vietnam War costs and nearly equals the total military budgetary allocation for fiscal 2008. However, if Bush's request for supplemental appropriations for 2007 is granted, the cost of GWOT for 2007 will be $22 billion higher than that earmarked for 2008. Since 2005, the US has spent more than $100 billion each year on the "war on terror".

    Service-wise, out of the DOD's total base budget of $481.4 billion, the Air Force has the lead with a budget of $136.6 billion (28 per cent), followed by the Army at $130.1 billion (27 per cent), the Navy at $119.3 billion (25 per cent) and the Marine Corps at $20.5 billion (4 per cent). The Defence Wide or inter-Service allocation is $74.9 billion, which constitutes 16 per cent of the DOD's budget. In the new budget, the Marine Corps saw its budget rising by 26.5 per cent over the previous fiscal year. The Army's increased by 18.6 per cent, the Navy's by 8.2 per cent, the Air Force's by 6.4 per cent and the Defence-Wide's by 5.6 per cent.

    Title-wise, operation and maintenance constitutes the single largest expenditure amounting to $165 billion, which is 34 per cent of the DOD's budget. On a year-on-year basis, this is a 10 per cent growth over 2007; and a 19 per cent growth over 2006. Allocations for personnel amounts to $116 billion, which represents 24 per cent of the DOD's budget - a growth of 4.5 percent over the previous year. The provision for arms procurement has exceeded the $100 billion mark and is now set at $102 billion. This is a whopping 26 per cent growth over 2007 and 31 per cent over that of 2006. However, allocation for defence research, development, test and evaluation (RDT&E) has actually gone down marginally by $8 million from the pervious $75.125 billion. With more than $75 billion for defence R&D, or 12 per cent of the total military budget and 16 per cent of the DoD's budget, the US is far ahead of countries like China, Russia, France, and the UK and Israel whose combined defence R&D expenditure in 2004 totalled $17 billion. In contrast, India's defence R&D stood at $1.2 billion in 2005-06, which was 6.6 per cent of its defence budget, and a mere 1.6 per cent of the US expenditure on defence R&D.

    Accounting for nearly half of the word's military expenditure (according to SIPRI, world military expenditure in 2005 stood at $1.1 trillion), the US is far ahead of countries like the UK, France, Japan and China, which account for 4 to 5 per cent each. America's 2008 defence allocation is also nineteen times that of Russia's, which stands at $32.6 billion in 2007 after registering a growth of 23 per cent over the previous year. With regard to China's official defence budget for 2006, the US budget is higher by eighteen times. However, some US agencies believe that China's defence budget is about $100 billion, second only to that of the US. Compared to regional military powers, especially China, India's defence expenditure stands at a lower level. The budgetary estimate for 2006-07 stood at Rs. 89,000 crore (roughly $20 billion), a growth of 9 per cent over the previous year. The present level of Indian defence expenditure is 57 per cent of the latest Chinese official defence expenditure figures, and 3 per cent that of America's latest allocated military expenditures.

    According to SIPRI, the US has been constantly revising upward its military expenditure, which has gone up from 3 per cent of GDP in 1999 to 4 per cent of GDP in 2004. With the new budget for 2008, US military expenditure has gone up to 4.4 per cent of its estimated GDP of $13.9 trillion for 2008, the highest since 1993. At the same time, world military expenditure has also continuously gone up in the same period in real terms, showing a positive correlation between the US and world military expenditures. Recently, Russia indicated its intention to increase its military expenditure, partly in response to the US decision to base elements of the missile defence system in Eastern Europe. It also plans to overhaul its military infrastructure at a cost of $189 billion over the next eight years. It is worth noting that Russia's defence budget in constant prices has more than doubled from a low of $10 billion in 1998 to $21 billion in 2005. Similarly, China's defence expenditure is also on the rise. Between 1990 and 2005, its defence expenditure rose by more than 15 per cent annually and by 12.5 per cent between 2005 and 2006. In future, its defence expenditure is expected to rise considering the massive modernisation plan it has undertaken and its robust economic growth. China has clearly indicated that there is a link between its military expenditure and its economic growth rate. India's defence expenditure is also set to increase in the foreseeable future because of the planned big-ticket purchases and ongoing defence modernisation. According to some estimates, India's defence purchases could well reach $100 billion over the next decade.

    With the continuous rise of the US military expenditure along with those of Russia, China and India, world military expenditure in real terms is all set to surpass the amounts spent at the peak of the Cold War. Though a part of the rising expenditure is attributable to America's ongoing war on terror, the rise in Russian military expenditure can be positively correlated with US actions in Eastern Europe and other areas in what Moscow sees as its strategic space. If the relationship between the two countries deteriorates, military expenditure on both sides will increase further. China, which is preparing itself for winning a techno-centric war with anyone (read the US), is hell-bent on matching the military power of the United States. The massive American budgetary allocation for the strategic modernisation of its forces will only drive China into higher military expenditures. For India, the concept of 'power projection' is getting more pronounced each year and this is likely to further push up defence expenditure in the future. In sum, world military expenditure seems headed north in the foreseeable future.