The Defense Department’s annual budget is a phantom figure, falling far short of what we truly spend on defense.  It doesn’t include either supplemental appropriations, or money allocated to defense by other departments.

But in trying to come up with a true figure, what should be included?  It’s not as easy to discern as you might think, but with the impending showdown over the debt ceiling, important to establish.

In 2008 the Department of Defense released announced its budget request for the fiscal year 2009: $515.4 billion.  But as Winslow T. Wheeler of the Center for Defense Information pointed out at the time, that figure was downright dishonest:

The $518.3 billion is incomplete; it does not include $70 billion requested to pay for the wars in Iraq and Afghanistan.  But that number too is inaccurate.  It does not include enough money to fight the wars for more than a few months in 2009.  If the violence in Iraq stays at its recently reduced levels – or even declines – that $70 billion should be about doubled to get through the entire year.  If things fall apart in Iraq and continue to deteriorate in Afghanistan, as is very likely, that $70 billion should be about tripled.  In either case, the amount requested in the budget for the wars is off by $70 billion to $140 billion.

Wheeler was spot on.  Cost of the wars in fiscal year 2009: $157 billion –  $95.5 billion (Iraq), $59.5 billion (Afghanistan).

But as Wheeler noted at the time, “this barely scratches the surface of the numbers in the Pentagon’s budget that are cooked by the military services, civilian managers, and budget personnel.”  It didn’t include the Department of Energy’s request for $17.1 billion for nuclear weapons research, $40.1 billion for the Department of Homeland Security, arms aid to allies, or reconstruction aid to Iraq and Afghanistan.

Two years later, Robert Higgs went through fiscal outlays for 2009 and tried to figure out exactly how much we had spent on defense that year.   He came up with the following:

National Security Outlays in Fiscal Year 2009

(billions of dollars)

Department of Defense 636.5
Department of Energy (nuclear weapons & environ. cleanup) 16.7
Department of State (plus intern. assistance) 36.3
Department of Veterans Affairs 95.5
Department of Homeland Security 51.7
Department of the Treasury (for Military Retirement Fund) 54.9
National Aeronautics & Space Administration (1/2 of total) 9.6
Net interest attributable to past debt-financed defense outlays 126.3
Total 1,027.5
Source: Author’s classifications and calculations; basic data from U.S. Office of Management and Budget, Budget of the United States Government, Fiscal Year 2011 and U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970.

The budget figures can be found here, in the 2011 budget figures, which include actual 2009 outlays.

But if Higgs’ figures are to be believed, the 2008 announcement that the 2009 defense budget would be $515.4 billion underestimated actual outlays by about half.

I’m trying to fairly determine what should be included when calculating annual defense expenditures.  Are there other things that should be included?  Are Higgs’ figures fair?  I didn’t quite understand which figures from the State Department budget had been included, or why.  Moreover, I didn’t know if 50% of the NASA budget was appropriate.  But his calculations regarding net interest seemed well-justified.

If anyone has thoughts on the subject, I’d very much like to hear them in the comments.