World military expenditure in 2005 presents a real terms increase of 3.4 per cent since 2004, and of 34 per cent over the 10-year period 1996–2005. The USA, responsible for about 80 per cent of the increase in 2005, is the principal determinant of the current world trend, and its military expenditure now accounts for almost half of the world total.
The USA is responsible for 48 per cent of the world total, distantly followed by the UK, France, Japan and China with 4–5 per cent each.(emphasis mine)
The USA is today unchallenged in our hemisphere, and we enjoy friendly relations with almost all great powers in the world, depending on one's perspective on where the US-China situation is headed. Fighting terrorism the right way--with bolstered intelligence cooperation, small-scale special forces activities and cooperation with our allies--is actually quite cheap.
But we still spend nearly as much on defense as the rest of the world combined. Why? If the threat of terrorism doesn't justify such massive expenditures, what on Earth are we so afraid of?
There isn't a good answer. Moreover, even this enormous level of expenditure doesn't seem to be turning the Bush administration's ambitious foreign policy aspirations into reality, and the unfortunate mismatch between means and ends is on display daily in Iraq. The thing to do, of course, would be to acknowledge the limits of military power, quickly pull our foreign policy goals into line with our national interests, and stop trying to reshape the culture and politics of faraway peoples that we don't understand, and who don't threaten us. Unfortunately, such a correction doesn't seem to be in the offing.
For a useful and thoughtful critique of US defense spending, see this PA by my former colleague Chuck Pena.