First US$1 Trillion Defense Budget Courtesy Of Russia’s “Special Military Operation” In Ukraine, China’s Activities In Its Near-Abroad; Issue For President Biden & 2024 Presidential Campaign
First US$1 Trillion Defense Budget Courtesy Of Russia’s “Special Military Operation” In Ukraine, China’s Activities In Its Near-Abroad; Likely Issue For President Biden During 2024 Presidential Campaign
Increased Defense Spending Means Less For Education, Healthcare, Infrastructure, Poverty Programs Unless Governments Borrow-And/Or Increase Taxes And Fees
On 24 February 2022, the armed forces of the Russian Federation invaded again and further into the territory of Ukraine. Nearing six months after the armed forces of the Russian Federation invaded territory of Ukraine, there exists a landscape where the armed forces of the Russian Federation have approximately tripled under its control (some of which is more permanent than others) the percentage of territory of Ukraine- from approximately 7% prior to 24 February 2022 to approximately 20% as of 16 August 2022.
Thus far in 2022, the United States Congress has authorized more than US$54 billion in commercial, defense, economic, humanitarian, and security assistance for Ukraine. Some of the authorization is for the United States Department of Defense to purchase replacements for hardware delivered to Ukraine, hardware to be delivered to Ukraine, and for hardware delivered by other countries to Ukraine.
By the end of 2022 at the current trajectory the value will likely increase by another US$20 billion and then an additional US$30 billion in 2023.
Absent sustained progress by the armed forces of Ukraine in removing the armed forces of the Russian Federation from its current positions (and at least some previously-occupied positions), unlikely sustainable will be robust United States government financial support past 24 February 2023, the one-year mark, or sooner. These next weeks will be critical for Ukraine- particularly leading to the United Nations General Assembly (UNGA) in September 2022 in New York City. Demonstrating momentum.
NOTE: The decisions by the government of the Russian Federation since 24 February 2022 have produced at least one defense hardware export opportunity for the United States. Not wanting to violate sanctions imposed by the government of the United States upon the government of the Russian Federation, the government of the Republic of the Philippines has cancelled a contract valued at US$227.33 million (for which a potentially-non-refundable deposit of US$38 million was delivered to Moscow) for sixteen Mi-17 helicopters which will now be CH-47 Chinook helicopters manufactured in Ridley Park, Pennsylvania, by Arlington, Virginia-based Boeing Vertol.
For the 2022 fiscal year, which began on 30 October 2021, the United States government spent approximately US$778 billion for defense and security.
The Biden-Harris Administration (2021- ) proposed approximately US$813 billion for the 2023 fiscal year. The United States House of Representatives voted 329-101 to support spending approximately US$850.3 billion in the 2023 fiscal year. The United States Senate is expected to support spending at least approximately US$858.5 billion in the 2023 fiscal year. The difference between what the Biden-Harris Administration proposed and what the United States Senate (and thus the United States Congress) is expected to support is 5.3%.
For perspective, Olaf Scholz, Chancellor of Republic of Germany, supports, but does not have unanimity among his coalition governing parties, for a debt-financed US$105 billion in fiscal year 2023 for defense and security spending.
For this analysis, the United States 2023 fiscal year defense and security budget will be presumed to be US$861.7 billion (a 6% increase from the originally proposed US$813 billion) which represents the focus of legislators where an increase in defense and security spending is usually accompanied by defense-related companies and security-related companies increasing their employment in districts (impacting the 435 members of the United States House of Representatives and 100 members of the United States Senate) and states (impacting members of the United States Senate) and increasing all of their campaign contributions.
Joseph Biden, President of the United States, at reception for Democratic National Committee (10 June 2022): “And that's why I went to [Representative] Adam [Schiff, D- California] and the leadership in the House and Senate and passed -- we passed an infrastructure bill -- road, highways. But not only that -- and bridges and airports -- but also the whole idea of an Internet that is affordable for everyone. We're going to spend over a trillion dollars -- a trillion 200 billion dollars [over ten years] to make sure we become the leading country in the world in terms of the modernization of infrastructure. And the idea that we could stand by and let that happen was just not -- not possible. Not possible. And that's why we reinforced NATO, and that's why we're giving help to Ukraine. But the point I'm making is this: that it is -- it's really consequential. And the -- and the byproduct -- and I said at the time, when we decided we were going to help Ukraine -- the point that I was making was that it's going to cost us too. It's going to cost the Western countries. It's going to cost NATO. It's going to cost the European countries and cost us. Because you know what was going to happen: The cost of gasoline and oil was going to go up, and the cost of food was going to go up.”
“I just think we have everything on our side on this thing,” Senator James Inhofe (R- Oklahoma) said. “We ought to be able to get the adequate increases that we want.”
“While this budget was being prepared, the Ukraine situation was not as obviously relevant as it is today. So there’s lots of pressure,” Senator Jack Reed (D- Rhode Island) said. “The inflation issue was not as palpable as it is today. So the factors have changed.”
Representative Jared Golden (D-Maine): “We need only look to world events in Ukraine, read reports regarding China’s plans and actions in the South China Sea, or simply read the latest headlines about Iranian nuclear ambitions and North Korean missile tests, as well as ongoing terrorist threats, in order to see why this additional funding is necessary to meet the security challenges of our time.”
What are the primary motivators that will place the United States government on a trajectory to have the world’s first-ever US$1 trillion defense and security spending budget?
Reimbursement for hardware delivered to Ukraine;
Responding to the war in Ukraine through enhancing the military capabilities of the thirty members of the North Atlantic Treaty Organization (NATO);
Reimbursing NATO country members which have deployed or re-deployed hardware directly or indirectly to Ukraine;
Reimbursing NATO member countries which have deployed or re-deployed hardware to NATO member countries which in turn deployed or re-deployed hardware to Ukraine;
Maintaining superiority to the armed forces of the Russian Federation;
Responding to increased defense and security spending by the People’s Republic of China and its activities relating to Taiwan and other countries.
Presuming the Biden-Harris Administration and the United States Congress agree to a minimum increase of 6.0% for the 2024 fiscal year defense and security budget, the spending would be US$913.4 billion.
Presuming the Biden-Harris Administration and the United States Congress agree to a minimum increase of 5.0 for the 2025 fiscal year defense and security budget, the spending would be US$968.2 billion.
Presuming the Biden-Harris Administration and the United States Congress agree to a minimum increase of 6.0% for the 2026 fiscal year defense and security budget, the spending would be US$1.02 trillion.
UPDATE (13 March 2023)- Michael McCord, Controller of the United States Department of Defense: Only accounting for annual inflation, “the budget will hit a trillion dollars,” within the next five years. “Maybe that’s going to be a psychological, big watershed moment for many of us, or some of us, but it is inevitable.” US$1 trillion would be approximately 3% of the Gross Domestic Product (GDP) of the United States. During World War II, defense-related expenditures were approximately 33% of GDP.
A defense and security budget of US$1 trillion will not have unanimity among parties represented in the United States Congress. There will be multi-partisan opposition. There will be multi-partisan support. There is no guarantee that those individuals seeking the presidential nomination of the Democratic Party and Republican Party will embrace such a staggering value with recent annual budget deficits of US$1 trillion or more and national debt of US$30.6 trillion- with no meaningful effort by any party to reduce it in a meaningful and sustained manner. Annual interest on the national debt exceeds US$445 billion.
President Biden, should he seek re-election in 2024, will endure enormous pressure from members of his caucus to prevent a US$1 trillion number while not matching or exceeding funding for other budget items including education, healthcare, and poverty programs.
Donald Trump, the 45th President of the United States, should he seek a second term in 2024- and potential rematch with President Biden with another candidate of the Democratic Party, is unlikely to support a defense and security budget of US$1 trillion particularly when he has and will advocate for reductions in income tax rates and advocates that NATO members should spend more on defense and security so that the United States may spend less. He has also been circumspect as to continuing support for Ukraine in its war with the Russian Federation.
In 2021, global defense and security spending was US$2.113 billion, an increase of approximately .7% compared to 2020 according to a report the Stockholm (Sweden-based) International Peace Research Institute (SIPRI). After a decline from 2011 to 2014, expenditures have increased annually. “Europe was already on an increasing trend, and this trend will accelerate and intensify,” Lucie Beraud-Sudreau, director of SIPRI’s military expenditure and arms production program. “Usually change happens slowly, until you are in a crisis and then change really happens. I think that’s where we are now.”
In 2022, NATO adopted a new “strategic concept” which includes increased focus (and pointed language) about the Russian Federation and for the first time People’s Republic of China. NATO may soon have a revised acronym: NAPTO for North Atlantic Pacific Treaty Organization.
NATO guidelines suggest members’ defense and security spending of 2% of Gross Domestic Product (GDP). Currently, nine NATO members meet that guideline and nineteen expect to meet the guideline by 2024.
Proposed NATO members Finland is projected to spend 2.2% in 2023 and Sweden is projected to spend 2% by 2028. The United Kingdom projects to spend 2.5% by 2030. Some NATO members are projecting to spend 2.5% or 3% within the next eight years. According to NATO Secretary-General Jens Stoltenberg, Two percent is increasingly seen as a floor, not as a ceiling.”
