EL ESTALLIDO DEL CONFLICTO

worsening of an already bloated trade deficit ($66.2 billion

in 1991), further widened the gap in the U.S. balance of payments and forced Washington to import more capital. Formerly the world's principal creditor nation, the United States has become the world's largest debtor country with a national debt of $2.9 trillion in 1991. This is the

equivalent of 50% of the U.S. GNP for that year. In

comparison, the German national debt even with the initial outlay of assistance to the Soviet Union and eastern Germany amounted to only 27% of their GNP in 1991.7

A number of analysts noted that the expansion of the Federal deficit took place at the same time that President Reagan had begun a major rearmament program. This

coincidence triggered a serious debate on the defense

policies of the United States. Between 1980 and 1986, U.S. defense spending rose from 5.1% tp 8.9% of the GNP (from $134 billion to $273 billion).8 The Reagan Administration justified this increase by pointing to the inadequacy of American military power in relation to the threat posed by both the Soviet Union and the revolutionary forces it

International Monetary Fund. International Financial Statistics, Vol XLVI, No. 2. (February 1993).

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supported. It was repeatedly emphasized that the Soviet Union had strongly augmented its industrial capacity and was believed to have increased its military expenditures.9 The huge budget deficit accumulated during this period was therefore blamed not on the military budget (which was

essential to U.S. security) but rather on another factor — the failure of programmed tax cuts to "produce an expansion of the economy large enough to sustain adequate revenue" in order to finance government expenditures.10

Nonetheless, critics pointed out that the shortcomings of the fiscal program of the Reagan Administration did not detract from the significant role that increased defense spending played in the growth of the Federal deficit and the decline of the American economy.*11 In his acclaimed book The Rise and Fall of the Great Powers (1989), Paul Kennedy argued that increased defense spending "diverted national resources from more productive investments, dampened growth

See the 1981-1987 editions of United States Department of Defense, Soviet Military Power. (Washington, D.C.).

Kupchan, op. cit., p. 451.

11 William Weida and Frank Gertcher. The Political Economy of National Defense. (Boulder and London: Westview Press, 1987): 71; David P. Calleo, Beyond American Hegemony: The Future of the Western Alliance. (New York: Basic Books, 1987): 116. See also Harris and Prestowitz, op. cit., p. 57; and Kupchan, op. cit., p. 451.

81 through the lack of competition among defense contractors, and reduced innovation and growth in the commercial sector through demands for research funds and scientists in the military."12 Another critic summed it up and said that the

financial and economic difficulties experienced by the United States are seen to be symptomatic of "a political system unable to bring its military needs and economic means into some rational relationship.1,13

This analysis suggests that reductions in the defense spending of the United States government are among the more important conditions that have to be addressed in order to resolve its trade and budget concerns. A corollary to this thesis is the proposition that cuts on defense spending must at the same time be complemented by appropriate cuts in

overseas responsibilities. Otherwise, Washington would simply be overextending its armed forces by retaining all the security obligations it assumed at the end of the Second World War, while withholding the resources needed to support them.14 The Gulf Crisis precipitated by the Iraqi invasion

12 Paul Kennedy. The Rise and Fall of the Great Powers. (New York: Vintage Books, 1989): 533.

13 Calleo, op. clt., p. 116.

14 This theme was emphasized by Professor Paul Kennedy before the Committee on the Budget, U.S. Senate, 100th Congress, 2nd Session, 1 March 1988.

of Kuwait on August 2, 1990 exposed the limits of the U.S. capacity to sustain its overseas commitments.15 Simply stated, American overseas commitments have become

contingent on Washington's ability to address its economic p r o b l e m s .

With the disintegration of the Soviet threat, steps were initiated in January 1990 by the Bush administration to reduce defense expenditures as part of an overall program to trim the deficit. Cuts included the mothballing of two

battleships, the reduction of military personnel by about 38,000, the cancellation of 15 major weapons programs, and most importantly, the closure or reduction of a number of bases, including fifteen overseas installations.16 By the end of 1992, defense cuts had led to the closure or

reduction of 398 installations in the United States and

overseas, including the unintended closure of Clark Air Base and Subic Naval Base.

15 The U.S. intervention was largely made possible by the acceptance of America's allies to bear more than 80% of the cost. The Department of Defense estimated that the incremental cost of the Gulf War reached $61.1 billion. By the end of 1992, U.S. allies had paid fully their pledged total of US$53.5 billion, much more than the 80% initially expected by U.S. planners.

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