‘If the Department of Defense can’t figure out a way to defend the United States on a budget of more than half a trillion dollars a year,” said then–secretary of defense Robert M. Gates in 2009, “then our problems are much bigger than anything that can be cured by buying a few more ships and planes.” Gates’s pointed remark reflects a concern broadly shared by small-government conservatives as well as many liberals. For the past 25 years, there has been no army, navy, or air force in the world that comes close to matching its American counterpart in terms of either its prowess on the battlefield or the size of its budget. In fact, the U.S. spent more on defense last year than the next seven top spenders combined. Many are clamoring for a slimmer, cheaper military. But can we defend the country for less? With a national debt of $19 trillion, how should American policymakers be thinking about defense spending?
Significantly, Gates himself soon discarded the notion that $500 billion per year represents the upper bound for a fiscally responsible defense budget. Instead, he decided, spending levels should correspond to the intensity of the threats we face and our strategy for defeating them. Yet Gates reversed himself only after an aggressive campaign to promote efficiency. In 2009–10, he canceled $300 billion of planned purchases and cut another $178 billion from projected spending. Yet in his final budget proposal, submitted in February 2011, Gates asked for $553 billion for fiscal year 2012, rising to $611 billion for 2016 (both figures are in current dollars and exclude supplemental appropriations for the war in Afghanistan). He warned the country “not [to] repeat the mistakes of the past by making drastic and ill-conceived cuts to the overall defense budget” while so many threats remained.
Regardless, Congress passed and the president signed the Budget Control Act of 2011 — the infamous “sequestration” bill — which ushered in five years of deprivation for the Department of Defense. This year, the Pentagon has a budget of $522 billion, or $89 billion less than what Gates projected (again excluding war-related costs, which have plummeted with the withdrawal of all but 9,800 troops from Afghanistan). The result is a force that, by the admission of its own leaders, is barely able to execute the missions required by the president’s strategy.
When a new president and new Congress take office next January, their first priority should be to restore the defense budget to the level Gates requested, and they should maintain at least that level of investment for a minimum of a decade, or until the world becomes a substantially safer place. After all, when Secretary Gates submitted his final proposal, the Islamic State existed mainly on paper, Iran was weighed down by punishing sanctions, the “reset” with Russia was still under way, the Taliban were in retreat, and China had not escalated its campaign of intimidation in the South China Sea. Without a stronger military and the diplomatic leverage it provides, none of these challenges is likely to be resolved anytime soon.
In the summer of 2014, when President Obama ordered the first U.S. airstrikes against the Islamic State, there were no planes within range of the intended targets. Within 30 hours, the aircraft carrier USS George H. W. Bush arrived in the Persian Gulf, where its F/A-18 Hornets began to fly 20 to 30 sorties per day. For 54 days, there was no other source of American air power. The USS Bush could arrive so quickly only because the U.S. Navy maintains one carrier on station in the western Pacific and another in the Middle East. However, because the maintenance and training requirements for a cutting-edge force are so demanding, having two carriers on station requires a total inventory of ten (an eleventh is scheduled to join the fleet in September).
No other navy has more than a single aircraft carrier — and those carriers are substantially smaller than their American counterparts. American carriers have an air wing that typically consists of 44 F/A-18s, various surveillance and electronic-warfare planes, and 19 helicopters. The Nimitz-class carriers in service today each host a crew of about 4,500 sailors and will serve about 50 years. Each carrier cost an average of almost $9 billion to build, adjusting for inflation.
It may seem like overkill for the U.S. to have eleven aircraft carriers when no one else has more than one. Yet the U.S. military has a fundamentally different purpose from those of its adversaries. For China, Russia, and others, the primary purpose of armed forces is to intimidate and punish nearby states that resist their influence. They are concerned neither with preventing aggression halfway around the world nor with leading the fight against terrorism. To project power across the globe, the U.S. requires air, land, and naval forces with unique expeditionary capabilities — the carrier fleet being just one example. Thus, comparing the overall size of the U.S. military and its budget with that of potential adversaries is of limited use.
Although peerless armed forces may provide the foundation for U.S. global leadership, their affordability is an entirely separate question. For defense analysts, there are three yardsticks for measuring affordability. First is the constant-dollar value of the defense budget; by that measure, today’s defense budgets are relatively high. The other two are defense spending as a percentage of GDP and as a percentage of the federal budget; by both of these measures, defense spending is near its all-time low. In the 1950s, the size of the military budget was staggering. It accounted for half of all federal spending, or between 9 and 10 percent of U.S. GDP. Thanks to the economic growth of the post-war era, that figure declined to less than 5 percent by 1980. The Reagan buildup pushed it back up to 6 percent, but it plunged to just 2.9 percent by the time George W. Bush took office. Despite hovering near 4 percent in the years after 9/11, the number is now back down to 3.3 percent and headed for an all-time low.
Defense spending as a percentage of federal spending is also at a historic low. That is due, in large part, to the inexorable growth of mandatory programs — mainly entitlements — which accounted for 60 percent of outlays in 2014 ($2.1 trillion in current dollars, or 12.2 percent of GDP), up from 27 percent a half century before. In comparison, defense spending accounted for 17.2 percent of outlays in 2014. By 2020, that number will fall to just 12 percent if present trends continue.
Contrary to much popular wisdom, defense spending does not drive the budget deficit; entitlements do. During each of the first five years of the Obama administration, the deficit was larger than the entire defense budget. In other words, even if the United States had not spent a single dollar on defense from 2009 through 2013, it would still have had a budget deficit every year, often a sizable one. Within five years, according to projections by the Congressional Budget Office (CBO), the cost of mandatory programs will grow by almost $700 billion per year in current dollars, while defense spending will rise by less than $50 billion, a difference that inflation will mostly consume.
Although entitlement reform has been the white whale of deficit hawks for decades, the fact remains that the federal government can responsibly spend another $90 billion per year on defense for at least a decade if the next Congress summons the ingenuity to make entitlement reform politically palatable. In fact, the termination of subsidies for Obamacare exchanges would by itself cover the cost of rebuilding our military.
The constant-dollar value of the defense budget is the sole metric according to which American military spending is historically high. In the decade after 9/11, the Pentagon’s base budget (excluding the cost of operations in Iraq and Afghanistan) grew by almost 50 percent in real terms — a rate of growth not seen since the height of the Reagan administration’s buildup. Yet those additional dollars bought much less than they did in the 1980s. Contrary to the claims of politicians and journalists, the culprit was not waste, fraud, or abuse, but simply the rising cost of goods and services, especially manpower, in an increasingly wealthy economy.
There are three basic categories of spending within the Defense Department’s budget: pay and benefits for both uniformed personnel and the department’s civilian work force; the cost of operations and maintenance (O&M), which covers things such as troop training, vehicle repairs, and fuel; and investment, which includes the purchase of new equipment and weapon systems, as well as research-and-development costs.
Of these three categories, pay and benefits consumes the largest share of the Pentagon budget. When Congress ended the draft and established an all-volunteer force in 1973, the U.S. military assumed the task of attracting servicemen, a decision that helped transform the demoralized force of the post-Vietnam years into the global benchmark for military professionalism — but which, unsurprisingly, has been very expensive.
According to a study by the American Enterprise Institute and the Bipartisan Policy Center, total pay and benefits for the troops rose by 60 percent in real terms from 1980 through 2012, even though the number of troops fell by 25 percent. A report commissioned by the Pentagon considered similar numbers from a different angle: In 1982, enlisted personnel had about the same median income as civilians with comparable levels of experience and education; by 2009, the median income for enlisted personnel corresponded to the 90th percentile of income for comparable civilians. The rise in the cost of compensation has been especially sharp in recent years because Congress expanded health-care benefits for retired military personnel at a time when the cost of health care was growing rapidly. In 2000, the Pentagon spent a little more than $20 billion per year on health care; now it spends almost $50 billion per year, or about 10 percent of its total budget (both figures are in constant dollars). Altogether, the per capita cost of compensation for uniformed personnel has risen 76 percent since 1998, according to an analysis of the 2015 defense budget by the Center for Strategic and Budgetary Assessments (CSBA).
And in addition to supporting the troops, the Department of Defense must compensate its roughly 750,000 civilian workers. That cost $69.6 billion in current dollars in 2015, about a 25 percent per capita increase in real terms since 1998. In total, military and civilian compensation cost the Pentagon $245.5 billion last year, or 49.4 percent of its annual budget.
Over the past 70 years, the cost of operations and maintenance has risen, too. CSBA’s analysis of the 2015 defense budget observes that O&M costs per troop “have grown steadily since the end of World War II at an annual rate of 2.6 percent above inflation.” Over the past 20 years, “the growth has trended higher at a rate of 2.9 percent annually.” In other words, O&M spending has grown at a rate roughly similar to that of the U.S. economy as a whole. This should not be surprising, since goods and services cost more in wealthier economies. Although a marginal reduction of O&M cost growth may be possible, that growth will continue and should be accepted as part of the cost of having adequate armed forces.
What isn’t consumed by the cost of personnel and operations may be spent on investment, the third major category of expenditure. Investment is essential to maintaining an edge over potential adversaries. But despite substantial growth in the defense budget from 2001 through 2011, the growing cost of personnel and operations restricted how much was available for investment.
During the Reagan buildup, funding for procurement — i.e., the purchase of new equipment and weapon systems — increased from $85 billion to $169 billion in today’s money. The Abrams tank, the Bradley fighting vehicle, the Apache helicopter, and the Blackhawk helicopter became the mainstays of the Army; the Air Force purchased a fleet of F-15 and F-16 fighters while developing the B-2 stealth bomber; and the Navy added 90 new ships and the first of a fleet of F/A-18 fighters.
But in the mid 1990s, procurement spending fell back to its mid-1970s nadir of about $60 billion per year in today’s money, or about 40 percent of its Reagan-era peak. This period became known as the “procurement holiday.” Even though procurement spending rose after 9/11, it never approached the Reagan-era peak, topping out at $114 billion in 2010 (adjusting for inflation), and much of that new spending had to compensate for the procurement holiday. Today, the Abrams tank and its Reagan-era siblings are still the mainstays of the Army, Navy, and Air Force. These weapon systems have all been retrofitted with newer technology, but they are aging platforms that belong to a previous generation. And, as with personnel and operations costs, a dollar today does not buy as much in matériel as it did 30 years ago.
If the Pentagon now gets less bang for every buck, does rebuilding the military inevitably require more bucks? Or can austerity wring the inefficiencies out of an organization known for its wasteful habits?
There is a genuine need for reform at the Pentagon. But the belief that common sense alone can generate a windfall is little more than an artifact of Reagan-era myths about the Pentagon’s $600 toilet seats and $435 hammers — which were just that: myths.
The real barriers to reform are congressional politics, legitimate concerns about fairness, and the extraordinary complexity of developing cutting-edge technology in the public sector. And even if all of these reforms came to fruition, the savings would not come close to paying for the investment the U.S. military needs.
In April 2015, 38 defense experts from across the political spectrum sent an open letter to the Pentagon and Congress emphasizing the urgent need for reform. The letter highlighted three priorities for action: closing unnecessary bases, paring back the civilian work force, and reforming the military compensation system. The letter warned: “Reforms in these three areas will not be easy, painless, or popular.” They will also not be sufficient.
The Department of Defense still has excess real estate as a result of the rapid downsizing of the 1990s. As the letter points out, five rounds of base closures have led to recurring annual savings of $12 billion — but the closures ended ten years ago and there is substantial resistance on Capitol Hill to restarting them. Understandably, most congressmen are loath to see good jobs in their districts put on the chopping block, despite research showing that many communities thrive after a local base closure.
Everyone agrees that there are too many civilians working at the Pentagon, but no one is sure which ones are superfluous. The number of Defense Department civilians has already begun to come down from its 2011 peak and Congress is pursuing further cuts, but they are likely to be gradual at best.
In the field of compensation reform, Congress actually made substantial progress last year, yet without generating short-term savings that could be used to rebuild the force. Acting on the recommendations of an independent commission of experts, Congress agreed to replace a portion of the Pentagon’s defined-benefit pension plan with tax-free 401(k)-style individual retirement accounts. The department will match contributions to these accounts on a dollar-for-dollar basis up to 5 percent of an individual’s income. However, concerns about fairness mandated the inclusion of a grandfather clause so that no currently serving personnel would have their pension plan changed without their consent. Thus, savings will accumulate only as new recruits replace their departing predecessors.
The next major target for compensation reform is the military health-care system. But the process of reform is unlikely to be much simpler, either technically or politically, than reforming health care in the country as a whole. The CBO estimates that the Pentagon could save as much as $10 billion per year if it no longer allowed retired military personnel to purchase health insurance at a steep discount (for as little as one-sixth the cost of similar coverage in the private sector). Yet taking benefits away from those who served their country is extremely unpopular in the halls of Congress, especially because retired service members are a vocal and well-organized constituency.
The defense-policy bill for 2016 also included fairly aggressive legislation, championed by Senate Armed Services Committee chairman John McCain, to decentralize control of the weapons-development-and-acquisition process in order to prevent cost overruns, such as those that have plagued the new F-35 stealth fighter and Ford-class aircraft carriers. Calculating the savings associated with such reforms is extremely difficult, however, since cost overruns that never happen are like Conan Doyle’s dog that didn’t bark. Six years ago, Congress passed another set of acquisition reforms whose implementation received positive reviews from the Government Accountability Office. Yet the Congressional Research Service cautions that the impact of the reforms “may not be quantifiable until the next generation of weapon systems [is] in production.”
One last reform under way is the Pentagon’s painfully slow effort to improve its bookkeeping so that the Department of Defense can perform a proper audit. While this should generate some savings, there is little reason to expect that they will be substantial. All in all, reforms, while necessary, can generate only a fraction of the capital necessary to rebuild the U.S. military after the deprivation of the past five years and the wear and tear of more than a decade of fighting terrorism.
The real problem is not at the Pentagon, but in Congress, which passed the Budget Control Act and “sequestration” despite their obvious detriment to our defense capabilities. Sequestration refers to the automatic and indiscriminate cuts that go into effect if Congress appropriates more than is allowed by the Budget Control Act (BCA) of 2011. In practice, there are two sets of spending limits enshrined by the BCA. The first set of limits cut defense spending by about $50 billion per year for a decade, or $487 billion in total, compared with what Secretary Gates requested in 2011. The BCA also stipulated that if a special “super committee” could not identify an additional $1.2 trillion of savings over ten years, an even lower set of spending limits would come into effect, requiring an additional $495 billion of cuts to the defense budget over the life of the act. In total, the BCA has resulted in almost $1 trillion of defense cuts.
Since 2011, various negotiations have restored about 10 percent of those cuts; for example, the Obama–Boehner budget deal of last November, which revised the BCA caps upward modestly, restored $25 billion to the 2016 defense budget and will permit a $15 billion addition in 2017. Yet while such revisions can slow the erosion of military preparedness — a necessity in light of growing threats — they are not sufficient to do what military leaders agree must be done: rebuild the force.
To implement the cuts mandated by the BCA, the Pentagon has been forced to reduce the size and readiness of the armed forces while delaying the development and acquisition of up-to-date weapon systems. The result is a consensus among the most senior officers in each of the military services that their troops can no longer execute the country’s defense strategy. At a hearing before the Senate Armed Services Committee in January 2015, then–Army chief of staff General Ray Odierno reported that “readiness has been degraded to its lowest level in 20 years. Today we only have 33 percent of our brigades ready to the extent we would expect them to be if asked to fight.” Then–chief of naval operations Admiral Jonathan Greenert said, “Our contingency-response force, that’s what’s on call from the United States, is one-third of what it should be and what it needs to be.” The Air Force chief of staff, General Mark Welsh, said that if his airplanes are like cars, “we currently have twelve fleets of airplanes that qualify for antique license plates in the state of Virginia,” emphasizing: “We must modernize our air force.”
In the years after the Berlin Wall came down, the size of the U.S. Army fell rapidly, from 770,000 active-duty soldiers to just 482,000. It rose to 560,000 because of the wars in Iraq and Afghanistan but is now being cut to 450,000 soldiers and may have to fall as low as 420,000 because of the BCA. The perception that the Army’s job is to fight unpopular guerrilla wars has made it an attractive target for cuts. Take away the hammer, according to this school of thought, and we won’t be tempted to strike too many nails. Yet Americans have a dismal record of anticipating when and why their country will require dominant ground forces. The First and Second World Wars, as well as the Korean War, the Gulf War, and the invasion of Afghanistan, all came as surprises. Right now, the Army is not just too small — Gates recommended 520,000 soldiers — but also far behind on its requirements for training and its plans for modernization.
When the Wall came down, there were 566 ships in the Navy battle fleet, a number that had fallen to 318 by September 11. Now it stands at 276 and will continue falling if the BCA remains on the books — even though there is a bipartisan consensus that the fleet should have at least 300 ships, and probably more. One of the costs of having too few ships, despite incessant demand, is that deployments have gotten longer, wearing out both the ships and their sailors. On aircraft carriers, F/A-18 fighters with an expected life span of 6,000 flying hours are staying in the air for 8,000, 9,000, or more. The current situation will worsen without new investments.
The Air Force also has to contend with a fleet whose maintenance costs are rising along with its age. The average F-15 is now more than 27 years old, almost the age of the average pilot. Although old planes can be patched up and modernized, there is no way to give them stealth technology or advanced networking capabilities. The one plane that has those capabilities is the in-development F-35, which has been plagued by cost overruns and technical delays. Yet those are sunk costs. The only question now — for the Navy and Marine Corps as well as the Air Force — is whether the country will pay to give its aviators a next-generation fighter.
Our large-scale military unpreparedness cannot be addressed by the reforms the Pentagon is already pursuing. When conservatives find themselves at a crossroads, they often ask, “What would Reagan do?” In this instance, the answer is clear. A return to Gates-level defense budgets is the first step to reversing our military decline. In light of the current president’s pursuit of foreign and defense policies worthy of Jimmy Carter, a return to Reaganesque principles is due.
– Mr. Adesnik is the policy director of the Foreign Policy Initiative.