Recently, Horowitz sat down with Sam, a bright high school senior preparing to enter Ball State University. He was curious about economics and wanted to know more. “What do you want to do with your life?” Horowitz asked. He said he planned to enter the University’s Army ROTC program and then join the army.
Channeling physicist Enrico Fermi’s approach of breaking down complex problems with simple numbers, Horowitz asked, “What does the US spend on defense?”Sam searched his phone. “$841.4 billion,” he read. Digging deeper, he found that Operations and Maintenance consumed $287.2 billion—the largest category, which covers training, equipment, and military healthcare.
“How does our defense spending compare to other countries?” Horowitz asked. Sam responded with amazement, “We spend more than the next nine countries combined.” “Impressive. But which is bigger—Social Security or defense spending?””Probably defense,” Sam guessed confidently. He looked it up. Social Security paid $1.5 trillion in 2024—nearly double defense spending. And that excludes Medicare ($848 billion) and Medicaid ($890 billion).
“What percentage of our Gross Domestic Product is defense spending?” He looked at his phone and answered, “Defense spending is 3.4% of GDP.”
“Now look up what percentage federal debt is of GDP.” Sam’s eyes widened. “120%! And we pay $882 billion annually just on interest—nearly matching our entire defense budget.”
“Calculate this: what if interest rates on our $36.2 trillion debt increased by one percentage point?”He looked at his phone calculator. “$362 billion more annually in interest payments.”
“Who holds the debt?” Horowitz asked. Sam paused. “About 20% of the debt is held by government agencies like the Social Security Trust Fund and the Federal Reserve, 55% by US investors, and 24% by foreign investors.
Horowitz told Sam, “We currently have a trade deficit. When we import more than we export, we trade dollars for their goods, and they often reinvest those dollars in US assets, such as government bonds. That is where much of that 24% of government debt held by foreign investors is coming from.”
“This is a paradox politicians face—they want to reduce our trade deficit, but foreign dollars often return as debt investments. Make it harder for foreigners to invest, and we pay more to borrow, which affects defense spending.”
As Sam packed up, Horowitz could see him thinking. Economics wasn’t abstract theory anymore—it was the foundation underlying every policy decision that would shape his military career and the nation he’d serve.