The Truth about US Military Spending

Defense Spending 101: The Truth about US Military Spending

To incentivize a long-term debt reduction deal, members of Congress last year set up painful mandatory cuts called sequestration. Because budget negotiations failed, Americas men and women in uniform will suffer nearly $500 billion in cuts over the next decade unless Congress acts by Jan. 2. This 10 percent chop comes on top of more than $800 billion in cuts already imposed by the Obama administration. Secretary of Defense Leon Panetta says sequestration would be devastating but others contend the worlds mightiest military needs a trim. What are the facts?

Didnt US defense spending more than double during the last decade? Cant we return to those previous levels of spending as the wars wind down?
It is true that the defense budget has more than doubled. But those increases were largely tied to fighting the wars in Iraq and Afghanistan and conducting the war on terror globally. Not surprisingly, this has meant a near tripling in the operations and maintenance segment of the defense budget as equipment and ammunition is used at a far-higher rate than in peacetime. And when one removes the funds associated with fighting those wars, the underlying base defense budget from 2001 to 2008 only increased by an average of 4 percent annually, adjusted for inflation. Just looking to the last decade leaves out important parts of the story. When President Clinton was leaving the White House and Dick Cheney, then-candidate for vice president, told the military that help [was] on the way, the countrys defense burden had fallen to a postWorld War II low3 percent of the nations gross domestic product (GDP). The prior eight years had been marked by a procurement holiday in which too few new military platforms (ships, planes, and helicopters, for example) were being developed and bought to replace aging inventories of military equipment. It was also a period in which general readiness, especially of the US Navy and the US Army, to go to war if necessary was low. In short, when one talks about the increase in the defense budget, one has also to remember the hole the American military was in. And, even so, the defense burden of the base defense budget at the end of President Bushs term in office stood at approximately 3.5 percent. Since most of the new funds went to fighting the wars, rising personnel costs tied to putting servicemen and women in harms way, and keeping increasingly aging equipment up and running, the problem of fixing the procurement holiday from the 1990s has not been adequately addressed. As Andrew Krepinevich, president of the Center for Strategic and Budgetary Assessments, has noted, the increase in defense spending has produced a relatively hollow buildup when it comes to new systems and new equipment. And, finally, there remains the cost of resetting the military; that is, ensuring the force that returns after successive deployments in Iraq, Afghanistan, and elsewhere and uses increasingly worn-out equipment in battle are given the necessary level of new training and working equipment to meet contingencies yet to comeas they surely will. There is not only a moral obligation to bind the wounds and tend to the families of those who have fought so well and so long, but also to provide them with what they need to continue to answer the call to service.

Sequestration hits discretionary spending and defense equally, $500 billion each. But isnt that the way it should be if Congress is incapable of managing to pass targeted reductions in spending? What war are we going to lose if we cut $1 trillion from the defense budget?
As figures 1 and 2 indicate, sequestration does virtually nothing to address the source of the federal governments fiscal problem, which comes from the unchecked growth in spending on social entitlements. In 2012, Medicare,

Medicaid, and Social Security accounted for more than $1.5 trillion in federal spending, compared to $1.2 trillion for total discretionary spending, about half of which was defense spending. Considering that the rest of federal spending is debt servicethe most mandatory form of spendingof more than $224 billion in 2012, this means that almost the entire burden of sequestration falls on about 41 percent of the budget. This is not an equal share.

Defense and Entitlement Spending as Percentage of GDP

12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

1965

1962

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

Entitlements

National Defense

Source: Table 8.3Percentage Distribution of Outlays by Budget Enforcement Act Category: 1962 2017, www.whitehouse.gov/omb/budget/Historicals.

National Defense vs. Domestic Spending: Fiscal year 1961 to 2017 (in millions of $)
4,000,000 3,000,000 2,000,000 1,000,000 0

National Defense

Domestic: Discretionary and Mandatory

Source: OMB Historical Table 3.1Outlays by Superfunction and Function: 19402017, www.whitehouse.gov/omb/budget/Historicals.

2016

Domestic discretionary and mandatory spending includes: education; health; Medicare; Social Security; income security; energy; natural resources and environment; commerce and housing credit; transportation; community and regional development; general science, space, and technology; agriculture; justice; and general government Second, discretionary spending, and especially defense spending, has been subject to significant cuts in the past: first in Ronald Reagans second term of office, then under George H.W. Bush at the end of the Cold War, then during the 1990s under Bill Clinton. Barack Obama cut about $400 billion through 2010, another $489 billion under the Budget Control Act of 2011, and sequestration would take away at least another $500 billion. The US military not only makes sacrifices on the battlefield, but has sacrificed trillions of dollars worth of personnel strength, readiness, and weapons modernization over the past decades to forestall the governments fiscal crisis. Should sequester become a reality, according to Defense Secretary Leon Panetta, the result would be [t]he smallest ground forces since 1940; a fleet of fewer than 230 ships, the smallest level since 1915; and [t]he smallest tactical fighter force in the history of the Air Forcea result General Martin Dempsey, chairman of the Joint Chiefs of Staff, has said would pose unacceptable risk to national security. The battlefield effects of the existing cuts have already been felt in Iraq and Afghanistan. US land forces have been too small to sustain the efforts eventually asked of them in both campaigns. And President Obamas new defense guidance asserts that, henceforth (and contradicting past policy and long-standing practice), the United States will only retain the capacity to fight one war at a time. The true questions are: What war will we fight if we can only fight one? What will our enemies win without having to fight the United States?

If you include wartime costs, defense budgets have not gone down compared to historical numbers. Even without the war supplementals, budgets are at historic highs according to figure 3. So why should the US Department of Defense (DoD) be immune from cuts in hard times? National Defense Budget Authority (in millions of Fiscal Year 2013 $)
800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: National Defense Budget Estimates for Fiscal year 2013, Office of Under Secretary Of Defense, Comptroller, March 3, 2012. Supplemental funding for Iraq and Afghanistan

Figure 3 correctly measures military costs in constant, real dollars through the postWorld War II period. But what the chart leaves out are two critical benchmarks that give a truer picture of US federal and defense

spending. The first is the amazing growth of the American economy since World War II; even allowing for the late recession, GDP is almost 10 times what it was in 1947. Thus, the economic burden of defense has been cut almost in half, from a 50-year, Cold-War average of about 7 percent of GDP to 4.1 percent (3.4 percent without war costs) for Fiscal Year2013. Under the Obama Administrations plans, the latter will shrink to 3.2 percent by 2016. Most of all, the chart does not measure the value of what we get for that investmenta preeminent American military. The value is immediately apparent (a global, great-power peace unprecedented in modern history; a secure framework for global trade and prosperity; and the extraordinary worldwide expansion in the number of representative governments) but not easy to quantify. Moreover, it is not the case that defense spending has not been cut. During the administrations four years, more than $800 billion in future defense spending plans have been eliminatedfar more than any other part of the federal budget. Over a two-year period alone, more than 30 defense programs were cancelled, capped, or endedincluding such important programs as the F-22 stealth fighter, the Armys Future Combat System, the fleet of DDG-1000 destroyers, and numbers of ground-based, antiballistic missiles. Finally, should the Budget Control Act of 2011s mandate that, unless the president and Congress can reach an agreement on cutting another $1.2 trillion over the next decade from the federal budget before the years end, defense spending will automatically be trimmed by another $492 billiona possibility Secretary of Defense Leon Panetta has said would have a devastating effect on national defense.

We are spending more on our military than half of the rest of the world combined is spending on defense. Do we really need to spend that much?
Questions about what America spends on defense versus what other nations spend on defense should be understood in the context of what we ask our military to do, what our role in the world is, and who our enemies and adversaries are and are likely to be. From the Cold War to the post9/11 world, US spending on national defense has given our country a military preeminence that, in turn, has yielded enormous strategic returns by: Protecting the security and prosperity of the United States and its allies; Amplifying Americas diplomatic and economic leadership throughout the globe; Preventing the outbreak of great-power wars that marked previous centuries; Preserving the international order in the face of aggressive, illiberal threats. As the congressionally mandated, bipartisan Independent Review Panel of the Quadrennial Defense Review spelled out, this has required a military that has four enduring tasks: Defense of the homeland Assuring access to the sea, air, space and, now, cyberspace Preserving a favorable balance of power across Eurasia that prevents authoritarian domination of that region Providing for the global common good through such actions as humanitarian aid, development assistance, and disaster relief These are obviously large tasks, requiring significant military resources. They are also complicated, as the panel also notes, by five global trends: Radical Islamist extremism and the threat of terrorism The rise of new global great powers in Asia Continued struggle for power in the Persian Gulf and the greater Middle East An accelerating global competition for resources Persistent problems from failed and failing states The strength of this global international order provides America and its allies with real security at a low price while

imposing tremendous costs on would-be adversaries. Consider the case of Chinas rise. Over the past generation, Chinas meteoric economic development has also allowed for a steady, now two-decades-long program of military modernization. Estimates are that Beijing now spends about $170 billion per year on its formal defense program, but that figure would be considerably higher if the Chinese military had to pay its soldiers, airmen, and sailors salaries comparable to what their counterparts in the US military earn. Moreover, Chinas expenditures are focused primarily on gaining military leverage in a distinct region of the worldAsiawhile, as noted above, the US military has global responsibilities. The tasks in this equation are disproportionate: America seeks to keep the peace in East Asia because it is a vital element in the international system and important to Americas interests, while East Asia seeks to disrupt the regional balance and have no comparable stakes elsewhere. The fact that we can afford to maintain a military capable of keeping the great powers of the world at peace is a bargain at four cents on the dollar. And the fact that our allies, including former adversaries, have renounced the use of force except in support of American-led coalitions should be thought of as a triumph. The further fact that a potential challenger like China has such a steep hill to climb is an advantage to maintain: it would be preferable to deter China than to fight her.

Doesnt the Pentagon waste a lot of Americas money? For example, arent personnel costs for government contractors out of control? Wouldn't the cost of the budget go down if we reduced the number or cost of contract personnel? Wouldnt cutting waste from the Pentagons budget provide sufficient funds to make up for new cuts?
Let us start with the issue of DoD employees. DoD has three kinds of employees: active-duty and reserve members of the military services, government civilians, and civilian contractors. Broadly speaking, service members are the most expensive employees, as one would expect since they have the most dangerous jobs. Defense civilians are less expensive, and contractors are most often the cheapest solution. Moreover, hiring contract personnel allows for the flexibility to temporarily increase efforts against urgent, but often transitory, requirements without the expense of hiring additional, permanent staff. This is especially true when it comes to personnel costs, if for no other reason than that contracts can be terminated much more easily and contractors health care costs are not mandated by the government. Some contractors are of course well paid but often do extremely valuable and dangerous jobs, such as providing security, technical, or logistics assistance in combat zones. Replacing them with active-duty military would save little and require enlarging the force itself. It is also the case that contractors do work that does not need or cannot be done by the government. In an earlier era when drafted, low-wage manpower for the military was plentiful, perhaps manning on-post chow halls was not a waste of soldiers time; however, in todays much-smaller but all-professional force, this can be more inexpensively done by a contractor than a soldier. Conversely, a contractor providing high-level intelligence analysis or weapons maintenance and repair is likely to have skills, training, and experience well beyond what soldiers or government workers have. DoD must make every effort to spend its funds wisely, but to impose arbitrary limits on DoDs use of contractors would almost certainly end up costing more money and would equally reduce military effectiveness. Now, on the larger point of wasteful spending: as with any government agency, there is going to be waste. And while efforts to reform the Pentagons defense acquisition practices, reform military benefit programs, and reduce overhead costs are still laudable and should not be dismissed out of hand, there is no silver bullet here. First, government is government, and there will be waste, as with any nonprofit-making, nonprofit-seeking entity. Second, as former secretary of defense Robert Gates discovered in his 2010 effort to find as many efficiencies as he could in the department and the services, the optimal amount found was of the order of $30 billion a yearfar less than the amounts needed to put a dent in todays deficit. And third, for all the talk of $1,000 hammers, one can only hope that departments like Health and Human Services and entities like the US Postal Service would be

as efficient as the US military in carrying out its essential tasks. The wars in Iraq and Afghanistan have been the cheapest major conflicts the United States has ever engaged in as measured by the annual burden on GDPa remarkable fact given the scale of those conflicts, the difficulties faced in each, and the success obtained on the battlefield.

The F-35 program is often seen as an example of the Pentagons rank inefficiency. What is the justification for this program, and the explanation for its outrageous costs and problems?
Ironically, the F-35 was originally justified as an efficiency measure: variants of a single design would supply the majority Air Force, Navy, and Marine Corps tactical air fleets. These efficiencies of scale are still possible, and in austere budget times, the argument is more compelling than ever. But the governments poor management of the program has had a crippling effect. Unless the government quickly begins high-rate production of the F-35, the per-unit cost of the plane could become too expensive, not only for the United States, but for the dozens of allied countries who have agreed to purchase the F-35 and who have invested billions of dollars to develop it. The F-35 is needed to replace the aging A/V-8B Harriers, F-16s Falcons, and F/A-18s Hornets (and a variety of other so-called fourth-generation aircraft flown around the world by US allies) that make up the bulk of US Marine, US Navy carrier, and US Air Force tactical aviation fleets. But this was not just a requirement for numbers of planes; the F-35, in contrast to the aircraft it would replace, would incorporate new stealth technologies, have superior range, and greater carrying capacity for strike missions. With the emergence of stealth programs in Russia and China, and the increasing sophistication of air defenses and so-called anti-access programs by adversaries, the need for the F-35 is even more urgent. Given the critical demand for large numbers of next-generation fighters, the Clinton administration felt compelled to structure the program in what is called a highly concurrent way: that is, the Pentagon would require the defense companies to invent, design, test, and build the F-35 in a very short period of time. This made the F-35 both a technological and programming risk. Any mistakes at the front end of the process would be magnified through subsequent stages. Such an approach also demanded steady and consistent management on the governments part, and, in particular, predictable levels of funding. The US Air Force's Stealth vs. Nonstealth Fighter and Bomber Inventory 2500 2000 1500 1000 500 0 Nonstealth Stealth None of these conditions has been properly met. The wing needed to be redesigned, and software programs have yet to be refined. But by far the largest problem has been poor program management by the government. The government has changed requirements and exacerbated the inherently daunting engineering and schedule problems by constant budget shifts. The result is that today, a plant and production line designed to build up to 300 F-35s per year produces a few dozen. The efficiencies of scale remain to be realized2,500 aircraft for the US services and perhaps 1,000 for allies; if they are not realized, tens of billions of dollars and decades of effort will have been squandered.

Source: Annual Aviation Inventory and Funding Plan Fiscal Years (FY) 201342, http://www.defenseinnovationmarketplace.mil/resources/.

Conservatives like to compare ships and planes to the inventory the United States had in the early part of the 20th century. But cant a ship and a plane today do much more than what we had in those days? So why do we need as many?
Some things havent changed, such as the size of the oceans and the ability of a ship or plane to be two places at once. Numbers do still matter. Numbers matter in war, but they also matter in peacetime. Deterrence requires presence, and presence requires numbers. While our ships and planes are more capable, this will benefit our forces in wartime since our current and potential adversaries are not as capable, at least not yet. But our forces spend the majority of their time deterring, not fighting, wars. Indeed, physical presence has long been the driving measure of fleet size, in particular. This was the rationale behind the Two-Ocean Navy Act of the 1930s. The battleships of that era, too, were much more powerful than those of previous times, but the US government had a constant understanding of what the minimum level was. Another timeless approach to fleet-sizing was the understanding that the overall structure needed to be large and diverse enough to minimize the cost of presence and peacetime patrolling while maximizing the combat power needed in war. Thus, ocean-going navies like the Royal Navy or the US Navy had a mix of smaller frigates for patrolling or scouting missions and tried to keep large battlefleets concentrated. As the US Navys fleet shrinks in size, it is forced to rely upon its capital shipsaircraft carriers, nuclear attack submarines, and Aegis-equipped surface combatantsto perform many lesser roles for which they are poorly suited and too expensive. Foremost among these missions is the Obama administrations approach to missile defense, which employs Aegis destroyers and cruisers in place of the land-based system previously developed. This is not only a wasteful approach to missile defense, but it wastes a significant proportion of Americas most capable, multimission ships on a single mission. In addition, these ships now require other escorts to provide protection and support. Numbers matter in war. Not just numbers of ships, but aircraft: the US Navy has more aircraft carriers than carrier air wings. Not just ships and planes, but numbers of troops: our land forces were not large enough to properly fight in Iraq and Afghanistan at the same time. The problem with the US military is not just that its smaller than it used to be, but that, in a dangerous world, it is smaller than it needs to be.

Given Americas fiscal problems, wouldnt it be smart to change our strategic posture to one of offshore balancing rather than maintain our current forward-leaning global presence? What is wrong with addressing problems when they arise rather than fighting every battle as if it were tomorrow?
There are two persistent problems with offshore balancing. To begin with, it undercuts deterrence. Think of the long stand-off with the Soviets during the Cold War. To be sure, part of the reason the Soviets were reluctant to start a war in Germany was the attendant risk of offshore nuclear retaliation. But, even so, America and its allies felt the need to station nuclear forces in Germany, too. The forward conventional defense of NATO territory and Germanyincluding American and allied forces in surrounded Berlinmade it harder for the Soviets to believe that a rapid blitzkrieg-style attack could be successful enough to sever the onshore allies and US forces from their offshore reinforcements. Without onshore, forward-stationed US forces, dealing with a Soviet invasion after it arose meant dealing with defeat or an even more immensely and costly retaking of a lost continent. The second problem is the division of labor it entails, with American forces offshore and allied states providing the boots on the ground, and the deleterious effect it has on the coalition itself. Put simply, the latter have more skin in the game while the United States may think it can walk away when the going gets tough or, for political

reasons, so delay the decision to involve itself that the price for engaging is now prohibitive. In short, allied states can never be sure, in the absence of forward-deployed forces, that the offshore power will decide that coming to its coalition partners defense is really in its vital interest. Not only is deterrence weakened, but the parallel incentive for Americas coalition partners to help the United States in conflicts not directly affecting them is also losta facet of American strategic strength that has been played out in war after war the United States has been involved in since World War II, up to and including the wars in Iraq, Afghanistan, and Libya. At the same time, a complete outsourcing of on-the-ground tasks introduces its own risks. The Shah of Iran was once the onshore partner in the Persian Gulf to the offshore United States; it made strategic sense until the Peacock Throne collapsed, creating a larger problem than it ever solved. Finally, the problem with offshore balancing is that it limits the strategic efficacy of US military power. No amount of offshore balancingincluding the use of nuclear weapons in Japanwould have produced the desired outcome of World War II. Likewise, it required onshore invasions to topple the Taliban in Afghanistan and Saddam Hussein in Baghdad. And only recently have we been reminded of the limits of offshore balancing in Libya.

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