Budget Breaker? The Financial Cost of U.S. Military Alliances

Abstract

How do alliance commitments affect U.S. military spending? This question is at the heart of debates about the value of alliances and the future of U.S. grand strategy. One perspective, which we call the budget hawk view, asserts that alliances are exorbitantly expensive, as they require military investments to deter third-party adversaries and reassure allies, encourage free-riding, and facilitate reckless allied behavior. A competing view, which we label the bargain hunter perspective, claims that U.S. alliance commitments are relatively cheap and might even reduce military spending. Allies provide key military capabilities, reassurance and extended deterrence are cheaper than it might initially seem, and alliances reduce the need for costly military interventions by promoting peace. Despite the importance of this debate, few studies have attempted to determine the degree to which alliance commitments affect U.S. military spending. We use over-time variation in the number of U.S. alliance commitments to estimate their financial toll. A statistical model of U.S. defense expenditures from 1947 to 2019 shows that one new alliance commitment adds between $11 and $21 billion to the size of the defense budget. Military alliances benefit the United States in many ways but, consistent with the budget hawk view, they are expensive for Washington to maintain. As scholars and policymakers weigh the benefits and burdens of alliance commitments, they should consider whether the political and economic gains of security guarantees exceed their high financial cost.