The Dynamics of US Military Spendings

Military budget: of an entity, most often a nation or a state, is the budget and financial resources dedicated to raising and maintaining armed forces for that entity.

Economic growth: is the increase of per capita gross domestic product (GDP) or other measures of aggregate income, typically reported as the annual rate of change in real GDP

Military expenditure: include all current and capital expenditure on the armed forces, including peace keeping forces, defence ministries and other government agencies engaged in defence projects, paramilitary forces when judged to be trained, equipped and available for military operations and military space activities

Summary

Proiectul îşi propune să analizeze evoluţia cheltuielilor pentru apărare în S.U.A., pentru a realiza o analiză pregnantă am ales să îl împărţim în două părţi mari.

Prima parte oferă câteva informaţii teoretice cu privire la conceptul de planificare a bugetului pentru apărare, şi explică rolul planificării bugetare în cadrul politicii fiscale.

A doua parte mare este un studiu de caz care tratează şi analizează dinamica cheltuielilor cu apărarea în cazul Statelor Unite ale Americii. Analiza este facută pe baza datelor, respectiv sumelor repartizate sectorului apărarii din S.U.A, din anul 1948 până în anul 2012.

The project aims to analyze the evolution of US defense spendings. In order to achieve a stronger analysis, we have chosen to divide it into two major parts.

The first part provides some information on the theoretical concept of the defense budget planning and it presents the relation between defence expenditures and economic growth

The second great part is a case study wich analyze the dynamics of defense spending for the United States of America. The analysis is based on data, amounts distributed in the U.S. defense sector, from 1948 until 2012.

Introduction

The American case is an anomaly because rapid economic growth did not translate into correspondingly higher rates of military ex¬penditures. Certainly, the United States acquired greater inter¬national ambitions as a consequence of its expanding industrial capabilities. What separates American behavior from that of the other great powers, however, is not restraint from expansion but the relatively modest amounts of military spending needed to increase U.S. influence in the world. Although the growth in its industrial capacity outpaced all other countries, the United States did not emerge as an important player in international politics until Ger¬many appeared on the verge of winning World War I. We find that in the first two periods outlined here, American foreign policy provides evidence for the ambition hypothesis. The United States prospered and consolidated its position as a regional power. Before World War II, the fear hypothesis presents the best predictions of American behavior as the United States increased military spending in re¬sponse to German and Japanese aggression.

Military spending: In the two decades after the Civil War, the United States showed signs of its potential economic and military power but failed to realize it. The bitter domestic conflict had delayed the emergence of the United States as a great power. By most measures, the American military was relatively weaker than its counterparts across the Atlantic. By 1870, however, the United States began to challenge Britain's indus¬trial primacy. American GDP already exceeded the other great powers, and it would eventually surpass Britain as well as Germany in all indicators of industrial capacity. However, even though the United States could marshal impressive economic resources, its mili¬tary spending from 1870 to 1890 remained much lower when com¬pared to states of a similar industrial ranking. With few exceptions, American policymakers kept military expenditures between $600 million and $700 million from 1870 to 1884. A naval buildup in 1885 marked the beginning of a steady climb in government investments in the armed forces.

The trend in American military spending provides mild support for the ambition hypothesis. In this 20-year period, the GDP of the United States more than doubled from $76 billion to $183 billion. This economic boom, however, did not translate into higher rates of military expenditures until 1885, when President Grover Cleveland embarked on a campaign to modernize American naval forces. Only efforts to contain revolts by American Indians in the unsettled West prompted increased funding for the country's armed forces. Two domestic fac¬tors curtailed the expansionist ambitions of American policymakers and kept military expenditures down. First, the United States still faced high levels of debt stemming from the Civil War. Second, these American debts created a banking crisis in 1873 that would later become the catalyst for a sharp economic downturn.

Most historians point to the late 1890s as the time when the United States emerged as a great power. From 1891 to 1913, concurrent with its emergence as one of the most powerful states in international relations, the United States consolidated its primacy in the Western Hemisphere. Isola¬tionist tendencies of previous periods gave way to an ambitious for¬eign policy based on greater American naval capabilities. These allowed the United States to project its military power into the Caribbean and Central America. Not only did American policy¬makers finally live up to the declarations of the Monroe Doctrine, they also extended U.S. territorial holdings as far as the Philippines. Nevertheless, while American military expenditures increased during this period of expansion, they remained lower than those of the European great powers. Before the Spanish-American War, spending on American armed forces hovered above $1 billion. After topping $4 billion in 1899, annual American military expenditures averaged $3.3 billion until the onset of World War I, when they rose to over $40 bil¬lion in 1918 and almost $71 billion in 1919.