What problem does treating defense spending as a fixed percentage of GDP create, and how can analysts detect it?

A constant GDP share can mask declining purchasing power: if inflation or platform costs rise, a stable percent of GDP may buy fewer people and platforms. Detect this by converting budgets into real terms each year (deflate by CPI/GDP deflator), then calculate year‑over‑year real growth. Flag years with zero or negative real growth. Additionally compute cumulative real shortfall versus a chosen growth path to quantify erosion (sum the annual deficits in real dollars or percent). That reveals whether capability is being sustained or slowly depleted.

How should governments set defense budgets to sustain modernization instead of just maintaining a fixed share of GDP?

Set targets in real (inflation‑adjusted) terms rather than as a percent of GDP. Practical steps: 1) Choose a base year and deflate nominal budgets using a reliable price index (CPI or GDP deflator). 2) Set an annual real growth target (e.g., 3–5%) that explicitly funds procurement, R&D, and readiness buckets. 3) Budget multi‑year plans that lock in real increases and avoid switching the burden to contingencies. 4) Review annually and adjust the real target to account for major platform cost growth or force‑structure changes.

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Real Growth Defense Budget

A Real Growth Defense Budget shifts the conversation from defense as a steady slice of GDP to whether funding truly rises in real terms to sustain and modernize forces. Measuring by real-year growth reveals if procurement, readiness, and innovation keep pace with evolving threats rather than appearing stable because the economy grows. This approach exposes hidden shortfalls, prioritizes long-term capability over convenient budget math, and guides smarter trade-offs between personnel, equipment, and R&D. Adopting real growth metrics helps policymakers, military leaders, and taxpayers see whether investments deliver resilience and technological edge—or merely preserve the status quo. Explore this metric to align funding with strategic needs.

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Summary updated 12/19/2025

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Insight. Strategy. Action. As the leading national security advisory firm, Beacon Global Strategies helps its clients strategically navigate geopolitical risk, defense and national security policy, federal business development, and global technology policy. Beacon Global Strategies is a Washington, D.C.-based strategic advisory firm advising leading companies on national security issues. Beacon supports clients across defense and national security policy, geopolitical risk, global technology policy, and federal business development. Founded in 2013, Beacon develops and supports the execution of bespoke strategies to mitigate business risk, drive growth, and navigate an increasingly complex geopolitical environment. Through its bipartisan team and decades of experience, Beacon provides a global perspective to help clients tackle their toughest challenges.

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What problem does treating defense spending as a fixed percentage of GDP create, and how can analysts detect it?

How should governments set defense budgets to sustain modernization instead of just maintaining a fixed share of GDP?

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Budget by Real-Year Growth, Not Economic Share

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Industry Shift Detected

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Beacon Global Strategies

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