Federal Components of GDP
Your tax dollars and the big scary military!
We have finally reached the last breakout of GDP. Which is awesome because I am getting kind of tired of talking about all the little components. There are just so many! It’s pretty amazing that we can have so much detail but, on the other hand, I suppose it is also kind of a you-better-have-it kind of thing too. I mean, the money is going somewhere. Where is it going? Well, here is how that looks in terms of the federal budget:
We saw a downward trend in overall government spending and then we saw it when we looked at Federal versus State spending and now we finally see the real driver here in all its glory. The reason the government’s share of GDP has been shrinking is due to the reductions in defense. Wow - so maybe the big scary military isn’t so scary after all? Just kidding. Of course it is. When you spend over 3% of the entire economy of the biggest economy on Earth on defense then you are going to have a pretty absurd military.
What is insane to me though is that just a few decades ago that spending level was much higher. I mean, imagine, almost a tenth of the economy just on defense. That is terrifying. It’s not just defense though, its also defense investment. That part of it is all the ongoing investment being made to make the big scary military even bigger and scarier. Even at 1%, consider how much money is being invested into the future. Now, consider all of the top secret things all those billions of dollars are spent on. At least, given how much money they are spending we better have some super cool technology we are saving for a rainy day. I’m look at you Area 51.
Then, there is nondefense. The boring, not commando stuff, like basically everything that the government does that isn’t protecting the country. The stuff that I would do if I were in the government because do you really think someone who writes a newsletter is going to be able to defend you? Nah.
To me, the decrease in defense spending was one of the most surprising things I found while I was researching the breakout of GDP and these posts. (Saved the best for last!) I have often heard the unbelievable numbers that get thrown around for military spending - it’s hundreds of billions of dollars. It’s easy to think - why? Why spend all that money? Why continue to raise that amount spent year after year? (Remember, I am the soft guy writing a newsletter not the person who is going to defend you.) But, when I made this chart, I realized that while we have spent more in nominal terms, we could actually be spending a lot more if we wanted to keep pace with historical ratios. So, it’s kind of the best of both worlds. We would hope that the percentage of spending would decrease and that the world would be a better less scary place. But, we continue to increase the budget and keep things in good shape…just in case. If you want to be a Superpower, it don’t come cheap.
Related content:
Government Spending and Investment