How Is NATO Funded? And Why is President Trump Trying to Destroy It?

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As we move toward the NATO Summit and the Putin-Trump summit, I thought it made sense to review some of the details behind the President’s demands that NATO member countries pay up and stop doing what he regards as freeloading on the U.S. taxpayer’s dime. Most people have a general sense that Trump doesn’t seem to grasp how an alliance works, that it’s not meant to function as a protection racket. But the actual details are both sillier and more significant than it may seem on the surface.

Let’s discuss first how NATO’s funding works.

The actual NATO budget is quite small — a $1.4 billion military budget and a $250 million civilian budget. The U.S. pays a relatively modest part of that total, about 22 percent. The percentage is based on a formula which includes the size of each member state’s economy. This mainly goes to pay for the NATO headquarters in Belgium and the quite thin military infrastructure which coordinates and integrates the various member-country militaries which make up the alliance. That’s it. The whole thing is budgeted at less than $2 billion. The percentage the U.S. pays is reasonable relative to the size of the U.S. economy and no one is in arrears.

The vastly greater amount is the military budgets of all the member countries combined, which was $921 billion in 2017. The great majority of that is made up of the U.S. military budget. In 2017 the U.S. military budget was $610 billion. The coming fiscal year puts it at $700 billion. (That big run-up is significant and we’ll return to it.) Some of that difference is driven by the fact that the U.S. economy is far larger than any individual NATO member state. But the U.S. also spends much more on a per-capita basis. Staying with the 2017 numbers, the U.S. spends 3.61 percent of GDP on defense. The next major NATO member is the U.K. down at 2.36 percent while most other major NATO powers are significantly under 2 percent. (Examples: France, 1.79 percent; Germany, 1.2 percent; Canada, 1.02 percent.)

In 2014, at U.S. urging, NATO set a target that member states should get to a minimum of 2 percent of GDP on military spending by 2024. Almost all of them have increased spending in GDP terms. But few are at 2 percent yet and it’s an open question how many will get there by 2024.

There is a very legitimate question of broad national policy whether the U.S. should still be paying for a military which acts as the ultimate guarantor of security in Europe and East Asia (in some ways, all over the world). Of course we are not simply defending these countries out of the goodness of our hearts. In addition to the various benefits the U.S. gains by being the globe’s preeminent military and economic power, there’s a more specific and concrete one. U.S. deployments in Europe mean that our military frontier is not on the east coast of the U.S. but somewhere in Eastern Europe. A parallel logic applies in East Asia. But for the basis of this discussion, I think we can largely set these broader questions aside for two reasons. First, it’s just too big a question to address in this post. But far more important, second, none of the players in this debate are proposing any reductions to U.S. defense spending. Indeed, President Trump is overseeing and frequently brags about a dramatic increase in U.S. military spending.

There are a number of reasons the U.S. would want NATO members to increase spending. One is to make it possible over time for the U.S. to reduce its own spending. The other more immediate issue is that an allied military, for it to be really useful as a military partner, has to have a certain level of readiness, modern and interoperable weaponry and so forth. In other words, it’s not just a matter of your spending X on your military. A member state has to meet some threshold level of being a modern military force for it to be useful for the U.S. military to work with at all. Just where that level is, what percentage of GDP gets you in the ballpark are details beyond my knowledge. But those are the reasons the U.S. wants and has wanted NATO partners to up their spending. And Trump is not the first U.S. President to push for this. Bush and Obama did too.

As you can see, though, there is no sense here that the Europeans ‘owe’ the U.S. any money. That’s absurd on a purely factual level. But it’s absurd at a more specific, substantive level as well. How this could make a certain sense is if the U.S. were looking at its $700 billion annual Pentagon budget and saying, “We don’t want to spend that much money anymore. We want to drop down to $350 billion a year. To make that possible we need you European countries to pick the shortfall.” If the NATO partners refused or were laggard in upping spending they still wouldn’t owe us money. But we would have a strong argument that their miserliness was forcing the U.S. to spend hundred of billions a year it didn’t want to spend.

But as you can see, that’s precisely what we’re not doing. We’re actually at the beginning of a new military buildup (coming after another in the first years of the century.) As military policy analysts point out, those numbers only make sense if you’re planning on continuing, permanent deployments of big navies and armies East Asia and Europe basically forever. President Trump is apparently griping that the 30k+ U.S. deployment in Germany costs too much. He wants to considering withdrawing them. But the U.S. doesn’t actually have bases for them in the U.S. and, again, the spending numbers Trump’s demanding assume those troop deployment numbers and that spending — along with the U.S.’s other big permanent deployments in South Korea and Japan.

All of this leads to a couple possible conclusions. One is that President Trump, at a very basic level, doesn’t understand how the U.S. military or the U.S. military budget works. The changes Trump is demanding in European military spending are ones that cannot have any impact on U.S. military spending because he wants to spend well over the current rates that interlock with current NATO member state spending levels. They can make NATO work better, create militaries that are more useful for the dominant force, the U.S. military, to work with. (Again, Bush and Obama both pressed for this.) But they can’t save money. The more obvious conclusion is that, for whatever reasons, President Trump is hostile to the very concept of our primary alliances in Europe and Northeast Asia, in which we do pay substantial sums to be the guarantor of security in those regions. He simply hasn’t reconciled that with his braggadocious clamoring for higher military spending which, whether he knows it or not, assume those continuing commitments.

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