programs, which are already slated in the baseline to grow slower than the economy and much slower than other parts of the budget, could threaten important national objectives. Even if ineffective or low-priority programs are targeted for the greatest cuts, if spending slows too rapidly it will be difficult for the government to accommodate needs related to population growth, to make new investments needed for future growth, and to deal with potential new international and environmental challenges. Given that defense and other domestic spending is not the driving factor behind the projected fiscal crisis, difficult choices for the actual cost drivers—Medicare, Medicaid, Social Security—are necessary and inevitable. Distracting attention from the large entitlement programs (as well as revenue needs) could be counterproductive. Tough decisions in those areas, on the other hand, could allow additional resources to be allocated to important defense and other domestic needs.

Consistent with the notion that there can be multiple paths to fiscal sustainability, this chapter discusses options for defense and other domestic spending that run the gamut from deep cuts to significant expansions (all relative to the study baseline). As with other policy discussions in this report, these options are meant to be illustrative and not exhaustive.

Spending Trends

Both the defense and other domestic components of this category of spending grew in real terms from 1962 to 2008. However, as Figure 7-1 shows, defense spending is now a much smaller share of the economy than in 1962, when it was over 9 percent of GDP. Over the same period, other domestic spending rose just slightly as a percentage of GDP.

Under the study’s baseline projections (see Chapter 1), overall defense and other domestic spending falls to 8.6 percent of GDP by 2019 and re-

FIGURE 7-1 Defense and other domestic spending as a percentage of GDP, 1962-2008.

FIGURE 7-1 Defense and other domestic spending as a percentage of GDP, 1962-2008.



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