BUDGET MATTERS BUDGET
Russia, China Boosting Defense Spending as Congress Dithers
While fiscal year 2024 defense appropriations remain in limbo as the House of Representatives continues to set new standards of dysfunctionality, Russia is moving forward with a massive increase in defense funding for 2024.
Despite Congress agreeing to $886 billion in 2024 defense spending as part of the debt-ceiling deal back in June, the two chambers failed to reconcile their defense bills before the end of the fiscal year, and Congress narrowly averted a government shutdown by kicking the can to Nov. 17 with a continuing resolution.
In the meantime, Russia appears to be going all in on defense spending.
An Oct. 11 article by Pavel Luzin and Alexandra Prokopenko published by the Carnegie Endowment for International Peace stated Russia is looking to almost double defense spending in 2024, with an increase from 3.9 to 6 percent of GDP. The report noted that’s still well below the 12 to 17 percent of GDP the Soviet Union spent on defense during the Cold War, but the authors said the boost in spending for 2024 is a sign Russia has no intention of backing down in Ukraine.
The article stated Russia is expecting significant revenue growth in 2024, with much of that coming from the oil and gas sector. In other words, U.S. and international sanctions designed to cripple Russia’s economy and military-industrial complex in response to its unprovoked invasion of Ukraine do not seem to be having the desired impact.
The increase in military funding will go primarily to military production and payments to soldiers wounded in Ukraine, the authors stated. However, not all the funding will translate to increased military power for Russia as its defense companies have experienced significant losses in recent years, which has grown worse since the invasion of Ukraine.
“All of this suggests that the growth in military spending this year is largely an attempt by the government to keep pace with these costs,” the authors said. “A similar process is likely to occur in 2024, given Russia’s defense sector’s dependence on imports. Western sanctions, the devaluation of the ruble, and the cost of import substitution mean a radical increase in the price tag of military equipment.”
The article further stated that Russia’s defense production is operating at full capacity, meaning the increased funding likely will not lead to increased productivity.
However, the authors concluded: “By staking everything on rising military expenditure, the Kremlin is forcing the economy into the snare of perpetual war.”
Meanwhile, Taiwan is planning to spend a record $19.1 billion — 2.5 percent of GDP — on defense in 2024. That includes baseline spending plus supplemental appropriations, according to reporting by Nikkei Asia and Taiwanese media outlets.
The United States will be the beneficiary of some of that increase, as Taiwan is acquiring F-16V fighter jets, M1A2T Abrams tanks and High Mobility Artillery Rocket Systems in 2024.
Taiwan’s increase in defense spending continues a trend that follows China’s increasing defense spending and aggressive behavior in the South China Sea.
In March, China announced a defense budget of $227 billion, which many experts say significantly undercounts actual spending. The Stockholm International Peace Research Institute, which maintains a database of global defense spending, estimated China spent more than $290 billion on defense in 2022, about 25 percent more than China’s official 2022 numbers.
However, during remarks on the Senate floor in September, Sen. Dan Sullivan, R-Alaska, said intelligence officials briefed senators that China’s defense spending is closer to $700 billion.
Even if that assessment is inflated, analysts argue China still gets far more for each defense dollar spent than the United States does.
A September analysis by Peter Robertson and Wilson Beaver in Foreign Policy noted that wages and other costs in China are much lower than in the United States.
“Comparing each country’s defense inputs suggests that the purchasing power of China’s overall defense budget is 60 percent higher than the dollar equivalent suggests. Even when using the old, low estimate of $290 billion, that would give the Chinese military nearly $469 billion in actual spending power — about 59 percent of the 2021 U.S. defense budget,” they wrote.
In addition, “China’s official defense budget excludes its paramilitary forces that can be deployed in a conflict, China’s militarized coast guard and foreign weapons purchases — and probably also excludes extensive military-civilian fusion,” they continued.
Plus, the authors posited that China’s research, development, testing and evaluation funding is not reflected in its official defense budget and buried elsewhere. Furthermore, they argued that China has been decreasing personnel costs in its defense budget, thereby increasing the proportion spent on weapons development and acquisition.
Thus, while there is significant uncertainty about exactly how much China is spending on defense, there is widespread agreement it is acquiring far more each year than its official topline number would suggest.
There is also no question about this: neither China nor Russia will start 2024 under a continuing resolution. ND