Friday, December 21, 2012

Of fiscal cliffhanging and peace dividends

The US can't afford to be the world's swashbuckling, big-spending policeman any longer.

US lawmakers are in the throes of a budget battle. Amidst all the skirmishes, sparring on tax rates, delicate and protracted negotiation of 'fiscal cliff's and so forth, it is surprising that no one seems to ask one simple question: Why does the US need to spend more on defense than the next 20 countries put together? 

It's true that the US is the world's policeman, self-appointed peacekeeper etc. (and the world does need someone to play those roles). However, Americans need to ask, at what price? 4.7% of GDP (most other countries spend in the 1.5-3% range) is a LOT of money. Scaling it back to even 4% (which would still have the US in far and away the first place) would save a whopping $100 Billion - a 'peace dividend', to spend on retraining the unemployed, healthcare, welfare, reducing taxes, investing in education, research and innovation etc., etc...*

The US is hardly in imminent danger of being attacked by any major country, so the reduced defense spending wouldn't exactly be ruinous. In any case, the US would still be spending more on defense than the next 15 countries combined . And as for the world's policeman / peacekeeper, multilateral institutions such as the UN (dysfunctional as they are) are the best bet.


* A brief historical note: US military spending was at a ridiculous peak of 70% of federal outlays in the post-World War II era, and remained fairly high (around 25%) amidst the cold-war rhetoric of the Reagan era. Expectedly, since 1991 when the Berlin wall fell (the presumptive end date of the cold war), this figure has fallen significantly and only rose a bit after 2001, with the war on terror. Since 1991, the US has thus enjoyed a 'peace dividend'.