Allocating the U.S. Department of Defense Budget: Revisiting the ‘Incremental/Fair Share Model’

Abstract

This article examines the ‘incremental/fair share model’ that was proposed by Alex Mintz in 1988 concerning the budget allocation of the U.S. Department of Defense. Although Mintz was unable to confirm the correctness of his model, this study demonstrated it to be statistically significant. In the statistical analyses, I used the two-stage least squares method and Durbin’s h-test to better scrutinize the model’s adequacy. Few previous studies have addressed the allocation of the U.S. defence budget; consequently, the incremental/fair-share model should constitute a starting point for further research on the U.S. defence budget allocation.

Keywords:

• United States
• defence
• budget allocation
• incrementalism
• fair share

Acknowledgements

I would like to express my gratitude to two anonymous referees whose comments were very helpful. I also thank Dr Keiichi Kawanaka, Professor of Nihon University, for useful comments. I am grateful to Shigeaki Ohtsuki, PhD, President of the Japan Institute of Statistical Technology, for technical support and advice on statistical analyses. I would also like to acknowledge that the research for this article was initially carried out while I was attached to the National Defense Academy of Japan. However, I completed the research after I had been transferred to the National Institute for Defense Studies. My current affiliation is with the Japan Maritime-Self Defense Force Second Service School. Any errors remain my own. I also would like to thank Editage (www.editage.com) for English language editing and Publication Support.

Notes

1. The ‘National Defense Budget Estimates’ published by the Under Secretary of Defense (Comptroller) every year is commonly called the ‘Green Book’.

2. The term ‘subcategory’ refers to ‘Army personnel spending’, ‘Navy operations and maintenance spending’, and ‘Air Force procurement spending’ among others.

3. As I noted previously, existing academic literature on defence budget allocation is sparse, even on an international scale; however, there are a few exceptions. Koubi (2008) discussed allocation between procurement and RDT&E at a theoretical level and found that when a nation perceives no rival, it allocates less money to RDT&E. In contrast, when a nation foresees a military challenge or is already in active competition, the RTD&E’s share of the budget is relatively high. However, Koubi’s research has no empirical component. On the other hand, Bar-El, Kagan, and Tishler (2010) highlight that Israel’s budget allocation towards defence procurement tends to be high due to its arms race with Syria.

4. Components consist of personnel, operations and maintenance, procurement, and RDT&E. As Mintz says, those components have traditionally accounted for approximately 95% of total U.S. defence spending (Mintz 1988, 112).