The PRC announced this past week that the People’s Liberation Army (PLA) budget would increase by about 7.5% in 2010. This marks the first time that the PLA budget has had an increase of less than 10% in nearly a decade. But don’t jump the gun. It is far from clear that it represents anything with implications for China’s long-term challenge to US predominance in the Asia Pacific.
Chinese defense spending figures are notoriously unreliable, important more for the political signals they send than actual spending. The scale of the announcement, roughly halving the rate of increase for this year’s defense budget compared with last year, is perhaps no more than a signal the Chinese government will be spending noticeably less on specific defense-related projects than it has in previous years.
Consistent with this possibility are two other recent announcements. One is that the launch of the Tiangong-1 (Heavenly Palace) spacelab would be delayed from 2010 to 2011. While this might be due to technical difficulties, it might also reflect a scarcity in resources sufficient to impinge upon the high visibility (and high prestige) manned space program. Furthermore, the PRC also announced the passage of a national defense mobilization law. This much delayed piece of legislation, several years in the making, will allow the PLA to legally draw upon the resources of the larger civilian economy in event of crisis. In combination, these various developments could suggest that the PLA is being asked to make trade offs, including curtailment of highly visible programs, and be prepared to draw more upon the civilian economy.
Certainly, worth noting, but hardly a sea change. If China’s defense spending growth is slowing, it’s still increasing.
The implications are uncertain; so is the motivation. On the one hand, it may be a domestic political move. There is apparent concern about the need to increase social spending to bridge the growing gap between rich and poor—and defense spending may be where it comes from. Alternatively, it may be that the Chinese economy has slowed so appreciably, it requires belt-tightening even in the Ministry of Defense.
Whatever the Chinese tea leaves may say, it is important to keep in mind that a reduced rate of growth for one year does not equate with cut-backs. It remains to be seen whether the PLA will actually turn inward in the coming year, or whether it will continue to expand its areas of operations and improve its array of equipment.
Reps. Jeb Hensarling (R-TX), Mike Pence (R-ID), and John Campbell (R-CA) recently unveiled a proposal to impose a limit on federal spending of 20 percent of Gross Domestic Product (GDP). This proposal serves as a necessary reminder that current federal spending is out of control and certain to grow further if nothing is done.
The sponsors of the amendment explain that the limit “would force Congress and the President to prioritize various spending needs and provide transparency to the difficult decisions and trade offs necessary to ensure that the federal government once again lives within its means.”
A limitation of 20 percent of GDP on total federal outlays can accommodate sufficient defense budgets. Even following the 9/11 attacks, the total defense expenditures (which includes several accounts in addition to what goes to the Department of Defense), have exceeded 4 percent of GDP only since the surge in Iraq, according to the Department of Defense’s “Green Book.”
Through most of this decade, total federal spending has been in the general vicinity of the 20 percent benchmark. There are several elements which determine that defense expenditures would be adequate under the broader spending limitation.
The first regards economic growth. Federal expenditures that exceed the 20 percent limitation to a significant degree are very likely to create economic stagnation. Defense expenditures will be a casualty of such stagnation, just as the Soviet and later Russian defense budgets, admittedly in a more dramatic fashion, were in the late 1980s and early 1990s. Furthermore, the limitation would create a dynamic where Congress will first have to find ways to grow the economy if it wants to increase spending. This is a healthy dynamic. A healthy defense budget is ultimately dependent on a healthy and growing economy.
Second, it is necessary to forecast the circumstances the defense budget will find itself in if entitlement and interest payments stay on their current trajectory. Under this scenario, where the total federal budget could consume 30, 35 or 40 percent of the economy, it is not at all likely that defense will receive 4 percent of GDP. Rather, the defense budget could, at best, receive 1 or 2 percent of GDP.
Finally, the entitlement mentality is seizing control of the defense budget itself. Deferred and in-kind benefits, particularly for health care, are increasing on a per capita basis in the military and are projected to continue to increase.
Finally, the authors of the spending limit amendment include a stipulation that the limit can be waived in the case of a declaration of war or a two-thirds vote in Congress. This gives lawmakers the flexibility to exceed the spending ceiling on national defense in the case of a true defense emergency. Of course, this is not to say that Congress will necessarily make the right choice concerning the defense budget under the spending limitation amendment. No procedural proposal can guarantee that outcome. Rather, it is to say that Congress is at least as likely to take a responsible stand regarding the defense budget under the limitation as it is without it.
The amendment sponsors stress that the “extreme borrowing on the part of nations is a direct threat to their national security.” A spending limit is not simply a responsible suggestion for restoring America’s fiscal sustainability, but could also mean greater security for defense budgets as well.