“American economic might is the indispensable foundation of American military might and the essential element in our ability to project a stabilizing power worldwide.” – President Dwight D. Eisenhower
On June 18, the Senate passed its version of 2019 defense authorization bill. Continuing the recent trend of raising defense spending, the bill proposes an $82 billion increase from 2017, resulting in an overall total defense budget of $716 billion. In an unusually bipartisan sign of cooperative government, these congressional budgets fully support the president and secretary of defense’s recently released National Defense and Military Strategies. Both of these documents prioritize “great power competition” with Russia and China over other issues, and the new budgets allocate national resources to meet the demands of those documents.
Unfortunately, neither the strategies nor the budgets account for a looming crisis. Driven primarily by increased mandatory spending, the federal debt threatens to consume all other spending, including defense, in the coming decade. Failure to reform mandatory spending now will ultimately erase any near-term gains in national defense and could result in significantly diminished U.S. global influence. Great power competition might continue, but not with the United States as a player.
Approaching a cliff
Concerns about mandatory spending are not new. Bean counters within and without the government have warned of a reckoning for decades. The reckoning is getting closer.
The largest programs in the mandatory spending category—Social Security, Medicare, and interest on the national debt—are all in some form of unsustainable crisis. This year, trustees from the Social Security and Medicare funds reported they will begin tapping into reserves in order to meet spending requirements. Trustees indicate that the Medicare fund will run out of dollars in 2026. Social Security is in slightly better shape, and will be solvent until 2034. After that, the federal government will have to find other means to fund those programs or apply draconian cuts to benefits.
Simultaneously, the Congressional Budget Office projects that the federal debt will continue to grow, and that the debt-to-GDP ratio will be 94.5 percent in 2027. Interest payments on that debt will also continue to grow, nearly doubling from 1.6 percent of GDP in 2018 to 3.1 percent in 2028. In dollars, that means net interest payments will increase from $316 billion in 2018 to $915 billion in 2028.
In other words, mandatory spending is going up, way up. As the CBO report states: “The federal government is on an unsustainable fiscal path. … Federal policymakers face economic, security, and social challenges requiring difficult policy choices, but a long-term fiscal plan is also needed to preserve flexibility to address unforeseen events.”
Defense spending at risk
What does this mean for defense spending? Nothing good.
For the U.S. Navy, for instance—where I am a commander—it will be harder to sustain recent shipbuilding and modernization efforts. Based on the requirements of the National Security Strategy and National Defense Strategy, the Navy estimates it needs to increase its current force structure of 280 ships to 355. Using 2017 dollars, the CBO estimates it will cost approximately $27 billion dollars per year, for the next 30 years, to reach a 355-ship Navy. When operating and personnel costs are included, the figure is about $103 billion annually. All of these numbers represent a significant increase from allocations over the last 20 years.
If mandatory spending increases take off and there are no structural changes, Congress will be forced to cut discretionary spending—including for projects like shipbuilding—in the mid-2020s to pay its bills. As it does, ships built in the 1980s and 90s will reach the end of their operating life, and without replacement ships, the nation’s fleet and global influence will shrink. What will happen then? For a current example, look no further than the United Kingdom’s Royal Navy. Due to recent austerity measures and budget priorities, the Royal Navy has shrunk to a shadow of its Cold War stature. Just last month, the U.K.’s national security adviser, Mark Sedwill, announced that his nation’s two new aircraft carriers would require allied escorts for wartime operations. Simply put, due to budget cuts, the Royal Navy does not have enough ships to defend its own capital ships. Apply similar scenarios across the U.S. Army, Air Force, and Marine Corps, and the fiscal future for defense looks very bleak.
It does not have to be this way. There is still time to avoid the fiscal freight train coming our way. Over the years, experts and elected representatives have proposed numerous reforms to Social Security and Medicare in order to maintain the trusts’ solvency. Similarly, there are solutions for controlling the annual deficits that continue to drive the overall debt higher. Unfortunately, none of the solutions are politically easy. In 2011, a Congressional “super-committee” attempted to find a solution and failed spectacularly. The failure gave birth to the Budget Control Act, commonly known as sequestration. This failure should not preclude another attempt. If the United States wishes to compete on the world stage, it’s time to try again.