This article argues why percentage of GDP is the wrong yardstick.

The Bush Administration requested $541 billion for national defense in FY 2009. [...] The Administration also submitted a separate $70 billion placeholder request for ongoing military operations in Iraq and Afghanistan, but Secretary of Defense Gates later provided an updated estimate of $170 billion for FY 2009.18

[...]

This means the United States will spend significantly more, in inflation-adjusted dollars, for defense in FY 2009 than it did during the peak years of the Korean War (1953; $545 billion), the Vietnam War (1968; $550 billion), or the 1980s Reagan-era buildup (1989; $522 billion).19 The United States is also projected to spend more on defense in FY 2009 than the next 45 highest spending countries combined, including 5.8 times more than China (second highest), 10.2 times more than Russia (third highest), and98.6 times more than Iran (22d highest). Indeed, the United States is expected to account for 48 percent of the world’s total military spending in FY 2009.

So why the discrepancy? Military-industrialists say that military spending is a falling proportion of GDP while these numbers say that dollar amount is increasing. The answer is, of course, that GDP is increasing.

His numbers are 4 years out of date, but Ben (of Ben and Jerry’s) explained it well with Oreos

or, if you prefer, an old-fashioned pie chart.

This handy-dandy poster has more up-to-date (2009) numbers:

click the poster for a fancy interactive version

• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

“Aside from its obvious troubles—afflicting all the largest financial institutions (see chart)—Merrill is in damn good shape… Part of Thain’s job, like that of a good physician, is to do no harm. Meaning: Keep the cash machine going…”

Forbes, April 2008

Merrill Lynch in “best stocks for 2008″ and AIG in 2007 “10 stocks to buy now.”

Fortune, 2008

“The fears surrounding the firm’s funding and liquidity position have been overstated,” says William Tanona of Goldman Sachs (GS) (which has done business with Lehman). His 12-month target: 58.

… “Lehman’s management, led by Richard Fuld, is the best in the business,” says [Punk Ziegel's Richard] Bove.

Business Week, April 2008

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