The Army Chief of Staff is Cooking the Budget Numbers

U.S. Army Chief of Staff, Gen. Mark A. Milley. (Photo: U.S. Army / Chuck E. Burden; Illustration by POGO)

Pentagon officials always seem ready with another excuse for why taxpayers must spend more money on the defense budget. Now the Army’s Chief of Staff, General Mark Milley, is trying to cook the books to claim U.S. defense spending is barely keeping up with China’s military spending.

The Stockholm International Peace Research Institute (SIPRI) has an independent estimate of global military spending that repeatedly shows the United States outspends any other nation—especially our potential adversaries—by a factor of at least two. The latest SIPRI analysis shows we’re spending more than Russia by a factor of 10, and that Russia actually reduced its military spending by 20 percent. China, our closest competitor budget-wise, spends less than a third what the United States does.

“Why is this even a contest?” Senate Defense Appropriations Ranking Member Senator Dick Durbin (D-IL) asked General Milley, in a recent hearing. Unable to justify why our budget is so much higher, General Milley is trying to convince Congress that the United States isn’t actually the global leader in spending. In fact, he argued, China’s spending is outpacing ours. Congress shouldn’t buy it.

The crux of the dispute is how to compare the budgets of different countries. Milley claims that these comparisons don’t account for the higher cost of labor and military manpower in the United States, seemingly arguing that these comparisons should instead be based on something called “purchasing power parity.” For those who didn’t take economics, purchasing power parity attempts to compare how much foreign currency would be required to buy the same amount of goods and services (i.e. labor) as a U.S. dollar would in the United States. Based on that calculus Sydney J. Freedberg Jr. at Breaking Defense made some guesses about the cost of hardware and manpower and found that Milley’s estimates were probably not far off.

However, if you look at SIPRI’s explanation of its methodology and purchasing power parity, they explain why this kind of comparison is bogus for true apples-to-apples comparisons, especially for military spending budgets. SIPRI finds they are of “limited relevance for the conversion of military expenditure data”:

Such [purchasing power parity rates] are designed to reflect the purchasing power for goods and services that are representative of spending patterns in each country, that is, primarily for civilian goods and services. Military expenditure is used to purchase a number of goods and services that are not typical of national consumption patterns.

SIPRI also notes those rates are inappropriate for countries in East Asia. General Milley nonetheless uses purchasing power parity to re-estimate the United States and Chinese military budgets, and includes on top of that an adjustment for different military manpower costs. That differential is already incorporated in the purchasing power parity calculus (again, counting services), however. That means he’s double counting.

It’s important to bear in mind that how defense dollars are spent counts much more towards military effectiveness than how many dollars are spent. We could spend every penny in the Treasury buying things like F-35s, Littoral Combat Ships, and Zumwalt-class destroyers. If they cannot perform in combat or don’t match the threat, then all the money spent on them will be wasted.

That being said, even cooking the numbers the United States still spends more than China and Russia, and at best it’s dishonest to suggest otherwise.