For the roughly forty years of the Cold War, the defense establishment of the United States had a remarkable degree of stability in terms of defense requirements. Everyone knew who the bad guys were, and the forces needed to prepare for potential conflict in the air, at sea, and on land were the subject of fairly broad consensus. Over those forty years, institutions developed around the allocation of the resources the nation invested in its defense, and those institutions have proved to be far more durable than the Cold War itself. President Eisenhower articulated this concern in his Military Industrial Complex speech, and he proved to be completely correct. We don't just have a large defense department - we have a large arms industry. The combination of the two has been immovable, and now that the Cold War, which led to the development of both a large peacetime military and a large arms industry, is over two decades in the past, we still persist in doing things in defense that are more appropriate to a previous age.
Each year, the DoD publishes a document called the Green Book, which provides a great perspective about what's actually getting spent where. Usefully, it reports the data in constant dollars, using a specific deflator for each category of military spending, not just a general inflation discount. Here's what we've been spending since World War II. You can see the four big peaks in spending for Korea, Vietnam, the Reagan era, and post 9-11, and the subsequent drops afterwards. Notice that the DoD is already imagining a spending reduction from the peak of about 200B, which is of the same magnitude as the post Cold War "peace dividend."
I don't think that normalizing this spending to GDP is particularly useful or instructive. GDP has increased from about 2T in 1948 to over 18T by 2018 and arguing that there is some "fair share" of GDP to devote to defense is really just an argument for increasing spending. Any real discussion of what we need to spend on defense needs to start with a discussion of requirements.
In my opinion, we are in a time of unprecedented national security. Our Navy cannot be credibly challenged on the high seas, nor our Air Force in the skies, nor our Army or Marines on the ground in a stand-up fight. There are dangers to all our military members when we're conducting offensive operations abroad, but our system no longer appears to have the ability to respond rapidly to that. We are spending heavily on procurement, research, and construction, but we are purchasing the sorts of things that would have been more appropriate for the Cold War than for our current situation. Increasingly, the cost to counter whole categories of weapons, like, for example, aircraft carrier battle groups, is dramatically less than the cost to deploy or even to operate those weapons, rendering them moot. And the last time we had the opportunity to reassess our defense requirements, after Desert Storm, we just reduced the armed forces in size by about a third, but retained the same force structure as during the Cold War.
In his April 1991 testimony to the Congress, military theorist John Boyd said,
“There are three basic elements [to win wars] and in order of importance they are: People, because wars are fought by people not weapons. Strategy and tactics [ideas] because wars fought without innovational ideas become ... blood baths winnable or not. Hardware, because weapons that don’t work or can’t be [produced] in quantity will bring down even the best people and best ideas.”This priority list appears to be inverted, in my view, in today's Defense department.
The next decade is going to be characterized a variety of important trends, such as a declining defense budget, an increasing realization that we are unlikely to be involved in the sorts of activities (occupation and nation-building efforts) that have characterized the last dozen years, and a broad agreement that it's probably a good idea to sustain the ability to operate far the the US. One could make a persuasive case that the nation-state system that's characterized international relations since 1648 has some competition from non-state actors such as pirates, criminal gangs, terrorist groups, international corporations, and others, and we haven't figured out a reliable means of dealing with those sorts of conflicts. There's an opportunity to reform what it is we do in national defense, and discuss the sorts of investments we need to make to secure American interests around the world. I think this can be done for far less money than we currently spend, particularly on procurement, but also on operations, and to some degree by reducing the number of men and women we potentially put in harm's way.
We should spend what we need to defending the country. But to do that, we definitely ought to figure out what we really need today, rather than just assuming the defense capabilities we've inherited from the past will suffice indefinitely.