Defense

Pillar 4 — Security. The fiscal room for the security state, read against the market's pricing of defense demand. Updated .

Implication:

Defense vs. Net Interest (% of GDP)

Blue = federal national defense consumption expenditures (FDEFX). Red = federal net interest payments (A091RC1Q027SBEA). Both as % of nominal GDP, quarterly forward-filled to month-end. ALFRED first-release vintages used where available. Shaded bands = NBER-dated US recessions. The dashed rule marks the onset of the most recent sustained crossover — the first month net interest rose above defense and stayed there.

Defense equities vs. the market (ITA / SPX)

Monthly total-return ratio of the iShares US Aerospace & Defense ETF (ITA, inception 2006-05-01) to the S&P 500 (^GSPC), rebased to 100 at inception. Values above 100 = defense outperforming the broad market cumulatively since 2006. Shaded bands = NBER-dated US recessions.

Global military spending — SIPRI

The fiscal panel above frames defense in US terms; the locality thesis is global. SIPRI publishes annual military expenditure for countries since 1949. Top 20 spenders for (constant 2023 USD billions):

US dominance is structural: % of the top-5 combined. The post-2022 step-change shows up clearly in Russia + Ukraine (now top-10 by absolute spend), and in Germany + Japan crossing into the top spenders for the first time since the 1980s. Source: SIPRI Military Expenditure Database.

Different ranking from the absolute-spend chart above: this shows fiscal burden. Wartime Ukraine sits at the top by far. Israel, Saudi Arabia, Russia, Algeria carry historically-high defense burdens. The NATO 2% benchmark is the floor that most allied countries are racing to clear in this regime.

US DoD top contractors — usaspending.gov

The dollar share of who actually wins US defense contracts. Top 12 prime-contract recipients by fiscal year, all contract types (excludes grants/loans):

FY 2024 — top 12

FY 2025 — top 12

Source: USASpending.gov API — DoD as awarding agency, contract types A/B/C/D only. Note the post-2022 surge in submarine contracting (Electric Boat = General Dynamics' submarine arm, the only US Virginia-class builder). Lockheed appears twice in some years because USAspending tracks awards by recipient division separately. Live data via /api/v2/search/spending_by_category/recipient/.

Methodology

The Defense page frames Pillar 4 of the Repricing of Locality thesis: the security state is structurally more expensive to run than it was in the peace-dividend era, while the sovereign's debt-service cost has risen faster than its defense outlays. This page reads that regime two ways — fiscally (share of GDP) and in prices (defense equities vs. the market).

Fiscal panel. Federal national defense consumption (FDEFX) and federal net interest payments (A091RC1Q027SBEA) are each expressed as a share of nominal GDP. Series are pulled through the ALFRED first-release routing used elsewhere in the dashboard, quarterly resampled to month-end and forward-filled so the chart reads cleanly at monthly cadence. The "crossover" is the first month net interest rose above defense and stayed there — the single metric that captures the end of the post-1990 fiscal equilibrium.

Market panel. ITA is the standard market proxy for US aerospace & defense equity exposure; SPX is the broad-market benchmark. The ratio ITA/SPX, rebased to 100 at ITA's inception (2006-05), isolates defense-sector performance net of beta. Drawdowns in this ratio are times when the market priced less defense spending; sustained breakouts above 100 are times it priced more.

Composite roadmap

The fiscal panel + market panel above are the live US-domestic regime read. The SIPRI + USAspending sections add the global / contractor lens. Still to come, when the data ships clean:

NATO ≥2% share — political-commitment lens. Tracks ratification more than spending.
SPF defense forecast revisions — quarterly survey signal of expected defense outlay
Aerospace capacity utilization — Census M3 panel, monthly

When all five layer cleanly, the page upgrades from a regime read to a Defense regime index with phase classification.

Canon

Barro & Redlick (2011, QJE) — defense shocks as macro variation; Ramey (2011, JEL/QJE) — military news-shock identification; CBO long-run budget outlooks for net-interest trajectory framing; Kilian (2009, AER) for the structural-shock vocabulary reused across the Energy page.

Inputs: FRED (FDEFX, A091RC1Q027SBEA, GDP), Yahoo Finance (ITA, ^GSPC). Nightly rebuild. See the methodology index for the full indicator manifest.