"Does it cost more to "defend" a larger economy?"
Good question, but I think the answer is yes. Here are three reasons off the top of my head:
1. As our economy grows, it is increasing dependant on global factors (unfettered transportation of goods, political stability, regional conflicts, terrorism, etc.). The military cost needed to address economic threats on a global basis would naturally grow in proportion to GDP growth.
2. Terrorism is a low cost proposition with the potential to inflict major economic damage. The old concept of defense spending equillibrium has been thrown out the window. Example 1: A simple shoulder fired rocket costing thousands can easily bring down an aircraft costing millions. Example 2: Seven suicidal terrorist with airline tickets can kill thousands and cost billions.
3. Technology is expensive. As the size of our military shrinks in terms of total headcount, the expense of training and equipment grows exponentially. The old days of gaining military advantage through headcount are long gone.
