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CAN THE UNITED STATES AFFORD THE NEW WORLD ORDER? David P. Calleo T,he answer depends both on the nature ofthe new world order and on what is meant by "afford." The latter consideration should come first, since it helps clarify the real issue—the distinction between America's capabilities and priorities. What Can America Afford? It may sound boastful to say that the United States is the only real superpower. Nevertheless, it seems true—certainly in a military sense. America's military budget is roughly three times that of Britain, France and Germany combined, and ten times that of Japan. The U.S. more than balanced the old Soviet Union in strategic nuclear power, has a fleet unchallenged on any ocean, a formidable and highly mobile land army and a huge air force. Technologically, these forces are unmatched. If history is any guide, America's military spending could be still much larger. America's military outlays, in constant dollars, are close to their highest level since World War II. But they have fallen dramatically as a percentage ofGNP from the levels ofthe 1950s and 1960s. The huge military buildup in the Reagan years, while it pushed the level of real annual defense outlays up by roughly 50% over 1980, only raised the ratio of military spending to GNP from 4.90% in 1980 to a high of 6.45% in David P. Calleo is Dean Acheson Professor of European Studies at the Paul H. Nitze School of Advanced International Studies, the Johns Hopkins University. 23 24 SAISREVIEW 1986—still far below the 7.5% to 9.6% range of the 1960s, or the 10.2% to 14.4% range between 1952 and 1959. The United States may also be regarded as the only superpower in a political and diplomatic sense. As many analysts have been at pains to stress, America has a unique ability to rally other nations to common purposes. Through NATO, the U.S. has long exercised the leading role in organizing Europe's collective security. America's military relationship has been still more hegemonic withJapan. Years of competition have developed into a special relationship with the Soviets as well. The Gulf War highlighted these American strengths. The U.S. provided the great bulk of both the military force and the diplomatic initiative. The coalition included not only substantial forces from Britain and France, but also from several Middle Eastern countries, together with strong diplomatic support from the Soviet Union, and substantial Japanese , German and Middle Eastern financial contributions. Indeed, America's allies more or less paid the operating costs of the American forces. If the Gulf War defines the new world order, the United States seems well able to afford it. A Less Optimistic View: The Fiscal Crisis Allied contributions, of course, defrayed only the war's direct operating costs. They did not cover the huge capital investments needed to create the American forces, nor the high costs of keeping the men and equipment for similar operations in the future. America's dazzling military performance, moreover, was the reward earned by the enormous military buildup of the Reagan years. But that buildup had already lost its forward momentum around 1987. The erosion thereafter has reflected not so much a lessening enthusiasm for military strength, as an acute federal budgetary crisis. Federal borrowing needs were 6.6% of the GNP in fiscal 1990 and 7.4% or $422 billion in fiscal 1991. Deficits on this huge scale go back to the fiscal year 1982, when Reagan's military buildup coincided with his tax cut. The predictable budgetary shortfall was supposed to be made up from rapid economic growth following the "supply-side" tax cuts of 1981, and from large cuts expected in the government's civilian spending. In fact, neither growth nor cuts in civilian spending filled the budgetary gap. Meanwhile, tight monetary policy and the indexing of tax brackets blocked those regular tax increases through inflation that had helped to mitigate earlier deficits. Soaring federal deficits were a major issue in the 1984 presidential elections. The Democratic candidate, Walter Mondale, called for major tax increases, while President Reagan reiterated his support for heavy CAN THE U...

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