China Outspends the U.S. on Defense? Here’s the Math.

(Bloomberg Opinion) -- When is $227 billion greater than $606 billion? When comparing Chinese defense spending to that of the U.S. — and if Army Chief of Staff Mark Milley is the one doing the math.

At a hearing last week, the ranking Democrat of the Senate’s defense appropriations subcommittee, Dick Durbin of Illinois, said to Milley: “You tell us that one of our biggest threats, greatest enemies, is Russia; turns out we read recently that Russia spends about $80 billion a year on its military. So let me get this straight: We’re spending 600, 700 billion dollars against an enemy that’s spending $80 billion. Why is this even a contest?”

There are quite a few good answers to that fatuous question, but Milley came up with a new one:

We’re the best-paid military in the world by a long shot … the cost of Russian soldiers or Chinese soldiers is a tiny fraction. So we would have to normalize the data in order to compare apples to apples and oranges to oranges….

Tale out the MILPERS [military personnel] accounts for both the Chinese, Russians, and/or the U.S., and then compare the investment costs …

I think you’ll find that Chinese and Russian investments, modernization, new weapons systems, etc., their R&D — which is all government-owned and also is much cheaper — I think you’d find a much closer comparison, Senator. 

Does the general have a solid argument, or is this more scaremongering from the brass to get Congress to pump up the Pentagon budget?  

Fortunately, Sydney J. Freedberg Jr. of Breaking Defense chose to spare us all a lot of work and crunch the numbers. Freedberg decided that there were two adjustments needed to get to oranges-to-oranges: factoring in the purchasing power parity of the three countries (necessary because Russia and China buy most of their military goods from government-owned or heavily subsidized contractors and pay using domestic currency rather than dollars) and subtracting Pentagon spending on pay and benefits from its budget. Here’s what came out of the calculator:

Yep, China’s spending is comparable to, or even greater than, America's. Russia remains a laggard, but a very dangerous one.

There are a couple of major caveats. First, there is no way to get a truly accurate figure for defense spending from authoritarian and highly secretive countries like China and Russia. Second, this opacity left Freedberg unable to factor in whatever those nations do spend on military salaries, health care, pensions and the like. (It is safe to assume it is a vastly smaller percentage than for the Pentagon.)

Nonetheless, I decided to run this way of slicing the data past a few people who know their way around the Pentagon budget.

“Milley and Breaking Defense have put their finger on a continuing problem: how to compare security spending in countries with different economies and budget practices,” said Mark Cancian, a former Marine colonel now with the International Security Program at the Center for Strategic and International Studies. “The U.S. tried to make those comparisons during the Cold War but, when the Soviet Union collapsed, found out that it was spending far more than we had thought.”

Cancian warned that any comparison based on spending leaves a lot of uncertainty: “I think that taking personnel costs out of the U.S. accounts overcompensates. Ultimately what matters is what comes out — ships, planes and troops — not what goes in.”

Thomas Mahnken, a former deputy assistant secretary of defense for policy planning who is now president of the Center for Strategic and Budgetary Assessments, said his organization is in the early stages of a project to get clarity on Beijing’s military spending. But he had some early conclusions.

“Certainly for the U.S., the fact that we spend so much on manpower increasingly drives our budget,” he said. “But over time, China too is going to have to pay much more for labor. As China becomes a wealthier country, and a grayer one due to demographic changes, and as the military-age cohort declines, there will be new considerations. Also, in recent years Beijing has gone on a modernization spree, and over time there are going to be increasing costs associated with operating and maintaining those forces.”

Bloomberg Opinion columnist Hal Brands noted that differences in military spending need to be looked at in the context of differences in military mission.

“In general, our inputs cost more than their inputs. But the real issue is that it is misleading to simply compare the U.S. and Russian military budgets — or the U.S. and Chinese military budgets — on a one-to-one basis because we operate globally in a way that none of our adversaries does,” he said. “Add in the fact that we only play away games — we operate near our competitors’ territories, at the end of our very long supply lines, all of which gives them a major geographic advantage — and we simply need a lot more military power to make our alliances credible and make our influence felt.”

Unsurprisingly, Bloomberg Opinion columnist and retired four-star admiral James Stavridis boiled it down: “To compare our soldiers with Chinese or Russian soldiers (or sailors) is like comparing not apples and oranges but apples and hubcaps. You get what you pay for, and we are spending a lot more — and getting good (and necessary) value for our money.”

Let Senator Durbin chew on that.

To contact the editor responsible for this story: Philip Gray at philipgray@bloomberg.net

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