Too Big a Buck for the Bang

Naturally enough, U.S. defense spending has shot up since Sept. 11, 2001, with little criticism from either side of the political aisle. The national security budget, just more than $300 billion in 2000, will be $385 billion in 2003, not even counting the costs of a possible war against Iraq. Internal administration planning documents now project that the budget will exceed $500 billion by 2009 (not counting most costs of homeland security, which are outside the Pentagon’s purview).

Such a $200 billion increase in the yearly military budget is too much. Granted, it would only drive defense spending from 3 percent of GDP to about 3.5 percent—still far less than in the Cold War. But when combined with the president’s tax cuts, it would worsen the U.S. federal deficit, deprive the country of the opportunity for any major domestic policy initiatives, and perhaps even hamper homeland security efforts in the end.

Some of the defense budget’s rocket-like trajectory is necessary. Of the $200 billion in expected growth between 2000 and 2009, about $60 billion is due to inflation. Another $15 billion reflects the additional costs of the war on terror, such as added base security, other Pentagon homeland defense responsibilities, augmentations to special forces and increased intelligence spending. About $30 billion is needed to end the “procurement holiday” of the 1990s. During that period, the Pentagon bought relatively little new equipment. Instead, it lived off the fruits of the Reagan defense buildup, while also selectively retiring older equipment as it cut force structure. But systems age, and the holiday now must end.

The above factors will drive up the annual defense budget by just more than $100 billion. What accounts for the other $100 billion in expected growth? There are two main explanations. First, despite candidate Bush’s pledge to “skip a generation” of weaponry, Defense Secretary Donald Rumsfeld has done little to change the weapons procurement plan he inherited, beyond canceling the (relatively inexpensive) Crusader howitzer. Rather than purchasing such highly expensive systems as F-22 fighters, V-22 tilt-rotor aircraft and Virginia-class submarines in large numbers, he could have canceled or scaled back some of these programs and instead purchased more of the less-expensive systems we already operate. Outfitted with modern sensors, computers and munitions, they would have much better capabilities than today’s force. Savings would be at least $10 billion a year relative to planned levels.

Second, and even more insidiously, Pentagon operations and maintenance (O&M) costs continue to skyrocket. Costs per troop are far higher than ever before. Part of the reason is that O&M funds everything from medical care to environmental cleanup to an oversized base infrastructure to peace operations and no-fly-zones, and these activities have become more prevalent and expensive in recent years. But part of the problem is old-fashioned Pentagon inefficiency. As a result, annual O&M costs are expected to keep going up—by another $40 billion during the rest of the decade.

To be blunt, Pentagon efforts to save money by outsourcing are failing. As the military services have turned over noncombat missions to private contractors, they have not reduced their own ranks. Instead, troops who were previously spending time fixing up bases or repairing equipment (or mowing lawns) are being given new jobs as their old jobs are privatized. Yet according to Pentagon documents, a couple of hundred thousand more private-sector personnel now are performing O&M activities than was the case just five years ago.

So the Pentagon must work harder to reduce its own payroll as it outsources. It can also save money in other ways. Although it is not popular to say so, military compensation for most troops is now generally quite competitive, after several years of generous improvements, and need no longer go up faster than inflation. In addition, even though some targeted increases in research and experimentation budgets are needed to support the Pentagon’s so-called transformation efforts, plans for missile defense, air-power modernization, space weapons research and certain other initiatives cost too much.

All of us are going to have to get used to a higher defense budget. But $500 billion a year by the end of the decade is about 10 percent too high, and we really need that $50 billion for other national needs.