With Osama bin Laden dead, can America go back to the days before terrorism and the big defense costs that came with it? The Sept. 11, 2001 attack on the United States took place near the end of a fiscal year in which the federal government ran a budget surplus of $127 billion. Military spending that year amounted to $291 billion, or about 15 percent of total spending. But the attack sent military budgets soaring. Defense outlays since 9/11 have increased, on average, by nearly 7 percent a year in inflation-adjusted terms. Military spending this year will be about $700 billion, nearly two and a half times the level in 2001, and nearly 20 percent of total federal spending.
The new billions being pumped into defense, along with other factors, helped change the budget surplus of 2001 into the deficits that followed. This year’s deficit will be close to $1.5 trillion, nearly 10 percent of gross domestic product, adding to growing fears of a debt crisis. If operations in Afghanistan and Iraq came to an end, total defense outlays would be reduced by roughly one fifth. Of course the Pentagon would still be spending hundreds of billions of dollars on pay and benefits for the troops, operations and maintenance, new weapons purchases, military construction, and housing for military families. The United States, for example, still keeps nearly 80,000 military personnel in Europe and 35,000 in Japan.
Room to cut spending?
As members of Congress return from recess this week to intensify their debate over the deficit and the debt, Osama bin Laden’s death focuses attention on military spending and specifically on the $110 billion-a-year U.S. commitment in Afghanistan. Until now, cuts in defense spending haven’t played a dominant role in the budget debate. But if U.S. troops were withdrawn from Afghanistan — which President Barack Obama says he wants to begin doing by July 1 — and if voters don’t see the need for continued outlays at post-9/11 levels, it could transform the budget debate.
Smaller military outlays might reduce the need for big cuts elsewhere in politically risky budget items like Medicare spending. In his fiscal year 2012 budget proposal, Obama has already called for discretionary military spending (that is, not including spending on military retirement benefits) to be cut by 5 percent. Some argue that bin Laden's death opens the door to new spending cuts.