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In peace time, the US government used to spend very little on defense, about one percent of GDP. But that changed after World War II when the United States found itself in a global contest against Communism. Ever since, defense spending has never been less than 3.6 percent of GDP. In wartime, of course, the United States spends as much as it can command. In World War II defense spending exceeded 41 percent of GDP in 1945.
Defense spending declined in the 1990s after the end of the Cold War and increased in the 2000s during the War on Terror.
Chart 2.32: Recent Defense Spending
Defense spending stood at 6.8 percent of GDP at the height of the Reagan defense buildup. But, beginning even before the breakup of the Soviet Union it began a decline, reaching below 6 percent in 1990, below 4 percent in 1996 and bottoming out at 3.5 percent of GDP in 2001, about half the level of 1985.
But 9/11, the terrorist attack on iconic US buildings in 2001, changed that, and defense spending began a substantial increase in two stages. First, it increased to 4.6 percent by 2005 for the invasion of Iraq, and then to 5.0 percent in 2008 for the the surge in Iraq.
Spending increased further to 5.7 percent in 2011 with the stepped up effort in Afghanistan. Defense spending is expected to decline to 4.5 percent of GDP in 2015 and 3.8 percent GDP by 2020.
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Spending data is from official government sources.
Detailed table of spending data sources here.
Federal spending data begins in 1792.
State and local spending data begins in 1890.
State and local spending data for individual states begins in 1957.
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Source: CBO Long-Term Budget Outlook .