We took his advice about the military-industrial complex, but we failed to learn his overall lesson about the need for balance and statesmanship.
We took his advice about the military-industrial complex, but we failed to learn his overall lesson about the need for balance and statesmanship.
I n his farewell address on January 17, 1961, President Dwight D. Eisenhower warned about the “military-industrial complex.” The retired general knew how dangerous an overpowered military could be, having fought against countries whose militaries trampled on the freedoms of their citizens and plunged the world into total war.
People often reference Eisenhower to argue against greater defense spending. They don’t often mention that the U.S. actually took his advice about defense spending, which was sound. But now the U.S. has overcorrected, and in doing so, it has ignored Eisenhower’s advice elsewhere in the speech.
When Eisenhower gave that speech, in the first quarter of 1961, defense spending was 11.6 percent of GDP. That is astonishingly high, considering that the Korean War was long over, and the Gulf of Tonkin incident was still more than three years away.
The following chart shows U.S. defense spending as a share of GDP since Eisenhower’s speech:
Even at the height of the Vietnam buildup, defense spending as a share of GDP was still slightly below the level it was when Eisenhower warned about an overpowered military-industrial complex. The Reagan administration buildup to end the Cold War and the buildup during the second Bush administration for the War on Terror look small by comparison.
It makes sense to increase defense spending for a strategic goal and then taper off that spending when the work is done. That’s what the U.S. did after the Cold War was won, and after the withdrawals from Iraq and Afghanistan.
Eisenhower was absolutely correct to warn about spending 11.6 percent of GDP on defense in peacetime. With today’s GDP of about $26 trillion, that would mean a roughly $3 trillion defense budget. That would be wasteful and would give the military way too much economic power.
His speech was not against a large defense budget in absolute terms. He accepted that, unlike in previous wars, the U.S. would not be able to improvise its defense industry anymore. Modern wars demanded modern technologies and production processes that would continue as an established industry in peacetime. “Our arms must be mighty, ready for instant action, so that no potential aggressor may be tempted to risk his own destruction,” Eisenhower said.
His concern was rather with the relative size of the defense budget, both compared to the economy as a whole and compared to the rest of federal spending. He did not want to reduce defense spending for its own sake. He wanted to bring it back into balance with other types of spending.
Balance was a key theme of his speech. He warned against the belief that “some spectacular and costly action could become the miraculous solution to all current difficulties.” Rather, he said:
Each proposal must be weighed in the light of a broader consideration: The need to maintain balance in and among national programs — balance between the private and the public economy, balance between cost and hoped for advantage — balance between the clearly necessary and the comfortably desirable; balance between our essential requirements as a nation and the duties imposed by the nation upon the individual; balance between actions of the moment and the national welfare of the future.
When Eisenhower spoke, the budget was imbalanced in favor of defense. Today, it’s a very different story, as the chart below illustrates:
When Eisenhower left office, 65.7 percent of federal spending was for defense. Today, it’s only 15.8 percent. Again, the Reagan buildup and the War on Terror were only temporary deviations from the overall trend. Defense last made up a majority of federal spending in the fourth quarter of 1969.
It’s reasonable to believe that Eisenhower would give a different speech today than he did in 1961. Then, defense spending as a share of GDP and as a share of federal spending were near historic highs. Today, those measures are near historic lows. Eisenhower said it is “the task of statesmanship to mold, to balance, and to integrate” the many competing goals of government, and to do so “within the principles of our democratic system — ever aiming toward the supreme goals of our free society.”
We have not heeded that portion of Eisenhower’s advice. Even if we put aside the goal of statesmanship as too lofty to describe the antics that now pass for politics in this country, federal spending is out of control because of the parts that Congress doesn’t debate at all: mandatory spending and interest payments.
Congressional Budget Office data only go back to 1962, but you can assume the numbers from that year were similar to when Eisenhower was speaking the year before. In 1962, about two-thirds of federal spending was discretionary and about one-third was mandatory and interest. Now, those proportions have flipped, and then some. About three-quarters of spending is mandatory and interest, and one-quarter is discretionary:
Even if Congress was full of statesmen, they wouldn’t have the opportunity to conduct statesmanship as Eisenhower defined it. Three quarters of federal spending is already out the door before they even start debating the budget. Under current law, Congress doesn’t have the chance to balance national priorities even if it wanted to.
And that portion of spending, mandatory and interest, is driving the debt in the long run. In Eisenhower’s farewell address, he said:
As we peer into society’s future, we — you and I, and our government — must avoid the impulse to live only for today, plundering, for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.
Too bad we completely ignored that part of his advice. The deficit for fiscal year 1962 was 1.2 percent of GDP, and debt held by the public was 42.3 percent of GDP. In fiscal year 2022, the deficit was 5.5 percent of GDP, and debt held by the public was 97 percent of GDP.
We’re headed toward “the insolvent phantom of tomorrow” at a rapid pace. The 2023 deficit was $2 trillion in a year of low unemployment, no U.S. forces involved in major wars, and no new domestic-spending programs. The mother of all fiscal cliffs is coming in 2025. By 2053, the CBO projects the deficit will be 10 percent of GDP, and debt held by the public will be 181 percent.
Over the next 30 years, the CBO projects that the entire discretionary budget, which includes the military, will shrink as a share of the economy. Yet overall spending as a share of the economy is still projected to grow. Nearly all spending growth comes from major health-care programs, interest, and, to a lesser extent, Social Security — none of which is subject to the annual budgeting process.
As the debt grows, private investment activity is crowded out, and massive deficits increase upward pressure on interest rates. Nearly the entire federal budget will be on autopilot, and half of all tax revenue will just go to making interest payments in a few decades.
Eisenhower’s fundamental concern in his farewell address was imbalance. In his day, the cause of imbalance was defense spending. Today, the cause is mandatory spending on entitlement programs and interest.
The U.S. should not spend 11.6 percent of GDP, or anything close to that, on defense again. But in a time when Russia, Iran, North Korea, and China are all becoming more aggressive against U.S. interests in various ways, and the U.S. can’t build enough naval vessels or resupply its armaments quickly enough, it might be reasonable to bump up defense spending from today’s 3.7 percent of GDP to, say, 4 percent or 4.2 percent. That wouldn’t be the overpowered military-industrial complex Eisenhower was warning about. It would be a response to global events commensurate with U.S. obligations and interests. National defense is something the government has to do.
But any addition to federal outlays is really hard to make when the debt picture is already so dire. And politicians in both parties seem largely uninterested in doing any of the balancing of priorities that Eisenhower said was necessary to statesmanship and national survival. “Good judgment seeks balance and progress; lack of it eventually finds imbalance and frustration,” he said. In the absence of good fiscal judgment for years now, “imbalance and frustration” is where we are, just as Eisenhower predicted.