Here’s why we may be underspending on defense

By Robert Samuelson

I’ve written several columns this year on military spending, contending — against conventional wisdom — that we don’t spend more than the next eight countries combined, including China and Russia. That startling claim is often made, and if it’s untrue, we’ve been deluding ourselves for years.

Rather than overspending on defense, we may be underspending. Our reputed military superiority may be exaggerated or a statistical fiction. Our true budget deficits may be larger than reported because they don’t include the money that, arguably, we should be spending on defense.

But am I right?

The only way to find out is to estimate our and their defense budgets, using an unconventional methodology called “purchasing power parity” (PPP). To do that, Congress should create a task force of experts that would examine Russia’s and China’s defense spending and compare it with our own.

PPP is at the heart of the military-spending debate. Here’s a simple, hypothetical example to illustrate the problem.

Assume that it costs $100,000 annually for the United States to maintain one American soldier, while it costs China 175,000 renminbi (RMB) to maintain an equivalent soldier. At current exchange rates — seven RMB to the dollar — China’s cost per soldier is $25,000. This means that China could afford two soldiers ($50,000), twice the American level, while still having total defense spending of only half the U.S. level.

Now, I have plucked these numbers from thin air. I have also made the differences quite large to show how the interplay of low costs in domestic currency and the conversion of that currency into ordinary dollars can produce counterintuitive results. In my example, China has twice as many soldiers for half the total costs.

It’s not that they’re getting less defense; it’s that they’re getting more defense for their buck. In my example, if China’s spending were converted to the same base as U.S. spending, its defense budget would be twice the American level, or $200,000.

(Note: Although my numbers are artificial, Todd Harrison of the Center for Strategic and International Studies notes that the average annual cost of one U.S. service member is about $125,000.)

The United States is a high-cost producer of defense; many other countries are low-cost producers. We rely on a voluntary military. Wages and fringe benefits must be high enough to attract and retain people in uniform. By contrast, other countries rely on military drafts. Producers of war equipment (planes, tanks, ships) face similar cost gaps.

Just how large are these gaps? I doubt anyone really knows. But we might find out if we looked more energetically.

Trying to convert conventional dollars into PPP dollars is not a simple technical exercise. As CSIS’s Harrison has pointed out, many countries don’t disclose their full defense budgets. In addition, the conversion into PPP dollars requires locating other goods and services that are comparable to defense purchases — and then changing defense spending to reflect the similarities.

We need a distinguished and bipartisan technical panel — defense experts, economists, statisticians — to work through these problems and reach a conclusion that is understandable by Congress and the public. It would be nice to be proven wrong, but the odds of that seem — to me — long.

(c) 2019, The Washington Post Writers Group