March 1, 2008  

Strategic security spending

In a speech at Kansas State University in November, Defense Secretary Robert M. Gates noted that, “Four times in the last century the United States has come to the end of a war, concluded that the nature of man and the world had changed for the better, and turned inward, unilaterally disarming and dismantling institutions important to our national security — in the process, giving ourselves a so-called ‘peace’ dividend. Four times we chose to forget history.”

Gates properly concluded that it is critically important not to make the same mistake a fifth time. In the face of many forecasts that the coming election and a post-Iraq War syndrome will reduce defense spending, numerous security officials and some think tanks have initiated an offensive to ensure that the Pentagon’s coffers are not diminished by illusory dreams of peace dividends or out of a public dissatisfaction with the costs of stabilizing the Middle East. Both the defense secretary and chairman of the Joint Chiefs of Staff Adm. Michael Mullen have warned of the implications if we simply revert to our historical form and reduce defense spending in the aftermath of today’s conflict.

Gates and Mullen have publicly called for a floor for defense spending of 4 percent of our gross domestic product (GDP). Excluding direct war-related supplemental funding, today’s Pentagon absorbs nearly 3.7 percent of a $13.2 trillion economy. Adding supplemental funding brings today’s level up to 4.2 percent, according to a historical update produced by the independent Center for Strategic and Budgetary Assessments. Defining a fixed level of spending would provide a stable basis for defense planning at more than half-a-trillion dollars a year.

Analysts at the Heritage Foundation, among others, have called for this level of investment for some time. So, too, have candidates in the current electoral campaign. Mike Huckabee trumped all contenders in a Foreign Affairs essay calling for 6 percent of GDP for the armed forces. This equates to about $788 billion a year, a total even the profligate Pentagon might have trouble spending. One candidate called for an additional increase of 100,000 ground troops, and his ante was immediately bettered by another’s proposal for “a million-man land force” that creates an Army larger than during the Cold War, when we deterred the Russians and Warsaw Pact. They don’t call this the “silly season” for nothing.

Gates identified historical patterns that we should avoid repeating but exaggerated the degree of decline or demobilization involved. Certainly after both world wars our country demobilized to a great degree, but the declines in defense spending after the Korean and Vietnam wars were far less and represented actual increases over pre-war spending. Additionally, the secretary’s speech miscounted our post-war experiences and missed the fifth occurrence after 1991 when the Soviet Union dissolved. This post-Cold War “peace dividend” began during the first Bush administration after Operation Desert Storm.

Although his math is shaky, Gates’ analysis is even weaker. I don’t think it’s fair to say that America turned “inward” or that it “unilaterally disarmed” itself after Korea, Vietnam or the Persian Gulf War, but we did reassess our portfolio of investments to achieve long-term security needs. We need to do so again today, but without the distorted history and Washington threat hype starting up presently. There is little talk in the ongoing campaign about post-Iraq peace dividends or dismantling national security institutions. In fact, there is far too little discussion about long-term security investment requirements, strategy options and the creation of the requisite institutions we need to face the 21st century.

The highlight of Gates’ speech was his accurate identification of critical national security requirements that exist outside the military. These requirements also must be factored into the debate on post-Iraq investments. It is possible that the opportunity costs created by increasing and fixing the military budget with a formula could crowd out more critical shortfalls elsewhere in the national security realm. To determine the mix of tools best suited to serve our interests and objectives in the long term, we need a holistic understanding of national security. During the Cold War, our strategy required a military designed and postured forward in Europe and South Korea. Looking into the 21st century, we need not reflexively preserve or lock in the past.

The Pentagon is not the only claimant to the nation’s treasury when it comes to security broadly defined and, arguably, it is not even at the head of the list when it comes to 21st century priorities. Undoubtedly, the current conflict has worn out both our military personnel and a lot of equipment — especially in the Army and Marine Corps. To be sure, long-deferred modernization requirements in the military need to be resourced after the current conflict subsides. The secretary of the Air Force has stated that there is an annual shortfall of $20 billion needed to preserve our air supremacy, and the Navy’s shipbuilding plans easily could use a $10 billion-a-year boost if we want to preserve our ability to dominate the global commons at sea. But just as certainly, there is a need to both adapt old institutions and create new ones to secure the blessings of freedom and advance our interests in a rapidly changing world. These new institutions may have higher claims for resources than Cold War practices.

We cannot have an intelligent debate on defense spending without looking at the strategic picture and looking at all of our national security requirements. We should not reduce defense spending in the near term as a reflex action, nor should we continue to reflexively invest in raw military power or conventional capabilities. If there is one lesson from the ongoing Long War, it is that there is more to national security than armed might and traditional war-fighting capabilities. Given the painful cost of this lesson, it is incumbent upon our national leaders to understand and act upon it wisely.

The first step in doing so is coming to grips with myths of defense spending.

The Defense Department’s lobbyists would have the American taxpayer believe that the military has been badly shortchanged for years. Arguments abound that we’re spending less than during the Cold War or that we’re spending less than we have in the past historically. These are all false statements, or they at least play with the numbers a bit.

The Pentagon has enormous responsibilities, but it also has substantial funding. In fact, U.S. military spending nearly outpaces the rest of the world combined. According to the International Institute of Strategic Studies, U.S. military spending was equal to that of the next 24 countries in the world in 2005, the last year included in its official database. Few of these countries represent potential adversaries. Of course, as the self-defined guarantor of international stability, with a wide range of global interests to protect, it is not surprising that our defense budget is the largest. But to listen to the defense intelligentsia in the capital, you would think that the nation was being parsimonious. The wailing raises a question: Why can’t the Pentagon provide a sufficient margin of security with spending that outclasses any rival or combination of rivals by several orders of magnitude? With respect to historical spending patterns, the Cold War is certainly not the best basis for comparison. During that period, we faced a hostile and monolithic threat that posed both an ideological alternative and an existential threat backed up by thousands of nuclear warheads, hundreds of divisions, and thousands of tanks and aircraft. I’m not underestimating al-Qaida when I suggest that an old man in a cave does not present the same kind of threat. Bin Laden and his adherents total in the tens of thousands at best and are dispersed in at least 60 countries. They present an ideological threat of dubious value, yet will pose a security threat to our way of life for some time.

Many, if not most, of these disaffected Islamists cannot be dissuaded by appeals to justice or freedom, nor will they be defeated by a Pentagon focused on its more traditional and increasingly irrelevant conceptions of warfare. Winning the Long War requires a different strategic calculus and operational capabilities from the Cold War, and a different but not larger military. As Richard Betts noted, the notion that we are now in World War IV is “an absurd inflation of the contemporary threat.”

“Past performance is not an indicator of future success” is an old caveat in the investment game, and the same holds true for security investments such as the Pentagon’s budget. Success in the Cold War required certain investment levels, and so will the 21st century. We need to examine these investment requirements on their merits based on our understanding of the nature of the threats we may face, not simply based on what was done in the past against very different threats that posed very different degrees of risk to our existence.

Now we can move on to the myth that America is spending less on defense. It is not accurate to say that defense spending has declined. It is true that we devote a smaller slice of our total national economy and a smaller percentage of our federal budget for military purposes. Thus, we are spending less relatively than we could, but this does not equate to spending less. Just because the American economy has doubled in size does not mean that the American taxpayer is required to double the Pentagon’s budget automatically.

This situation will continue and could accelerate. As clearly shown by Comptroller General David Walker in his talks around the country, the U.S. has long-term liabilities it is not facing up to. “You know, the American people are absolutely starved for two things: the truth, and leadership,” he said. As the nation’s chief accountant, he points out that the defense share of the federal budget has steadily declined while entitlement spending has dramatically increased. It will continue to grow significantly with the retirement of the boomer generation, who will expect extensive federal benefits. The percentage of the federal budget allocated for defense declined from 43 percent in the early Vietnam War years to 28 percent in 1986 (see chart: “Federal spending patterns”). In the past 20 years, it has declined further to 20 percent of a larger federal budget, and I project that it will continue to decline to something on the order of 15 percent by 2026. This will result in defense spending of under 3 percent of GDP.

The pressing reality of American demographics and the resulting funding shifts make Gates’ military spending floor moot. Between now and 2030, our 65-and-over population will double, to 72 million Americans. This boomer generation will represent roughly 20 percent of our citizenry. This will produce startling trends in federal spending for Social Security and health care. Medicare and Medicaid alone are projected to grow to 25 percent of federal spending in 2026 from the 1966 figure of 1 percent. Spending on our major three entitlement programs consumed more than $1 trillion in 2006, or 40 percent of the federal budget. By 2026, we will spend 13 percent of GDP and 47 percent of the federal budget on entitlements, if nothing is done to address these trends.

Because the country has poorly managed these pending liabilities, this demographically determined growth is imprudent and unsustainable. The funding increases for these programs pose profound implications for the nation’s ability to provide for its security and other government services. Walker does not exaggerate when he suggests that by 2040, the only government function will be to mail entitlement checks to retired citizens. There won’t be money left for anything else, including defense.

These projections could be worse if energy costs remain at $100 a barrel and if the country’s insatiable need for foreign funding of our debt requires sharply higher interest rates to attract offshore capital. In this regard, calls for reduced reliance on foreign oil and greater energy independence represent only part of the problem. Our collective inability to control our appetite for consumption and manage our national savings and trade accounts has made us very dependent on foreign financing. Perversely, China buys a lot of that debt — at least for now.

However, the true picture about the defense budget is masked when examined through either GDP percentage or as a share of the federal budget. Both of these indicators fail to capture the growth in the nation’s overall economy or the steady increases in the federal budget. Simply stated, the nation’s GDP is a measure of our capacity to invest — it does not reflect what the requirements are or what the nation’s overall strategy should be. It’s a crude measure of what we can afford to pay or extract from the private economy.

The fact of the matter is that defense spending, in real terms (in inflation adjusted dollars), has increased over time. While the Pentagon’s share of the federal budget has declined, its real or absolute resources have increased measurably. The total top line for the Defense Department has increased from $452 billion to $589 billion in constant budget dollars. So the declining defense argument needs a bit of clarification. In real terms, we spend more today than during the Cold War — about one-third more. This says a lot more about the ability of the Pentagon’s public relations team than it does our strategic sense of balance.

Furthermore, claims about Cold War spending levels are incorporating higher averages by including the spikes created during conflicts and periods of mobilization. When you exclude the large troop buildups for Cold War conflicts, defense spending — measured in constant fiscal 2008 dollars — has been remarkably constant at about $400 billion per year. What the Pentagon does not want the public to know is that the generals and admirals would like to keep funding levels closer to today’s higher levels, which are clearly well above the mean of an era with an existential threat. The “National defense budget authority” chart (see above) shows the resources allotted to national defense and the calculation for average spending from 1950 to 1990.

Rising Manpower Costs The spiraling costs of military manpower require further explanation today. During Donald Rumsfeld’s tenure, there was a strong emphasis on investing in technology and reducing service personnel accounts. This strategic orientation was based on the misguided belief that future wars could be deterred or won by exploiting America’s competitive advantages in information technology and precision warfare. Like modern business, the Pentagon adopted a capital-intensive strategy and outsourced routine tasks to industry. In fact, the 2006 Quadrennial Defense Review directed force cuts to the Army and Marine Corps, despite ample evidence from Iraq and Afghanistan that irregular conflicts, stability operations and counterinsurgencies are manpower intensive. The president ultimately reversed this policy decision and authorized substantial manpower increases to both the Army and Marine Corps.

Between these two ground forces, an increase of 92,000 troops was authorized. The Army is authorized to grow up to 547,000 soldiers (an increase of 65,000), and the Marine Corps by 27,000 to a total of 202,000. This decision reversed years of Office of the Secretary of Defense strategic guidance, which had emphasized “leap-ahead” technologies and embraced visions of “standoff warfare.” The fiscal 2008 budget provides $5.6 billion to support the first year of this ramp-up in both services and estimates that more than $110.3 billion will be required to acquire and equip these troops between now and 2012.

Serious and experienced analysts such as Fred Kagan of the American Enterprise Institute and Mike O’Hanlon of the Brookings Institution have called for larger ground forces based on potential, but plausible, scenarios of significant magnitude. The requirement for additional forces seems sound. However, the costs and implications of this personnel increase are staggering. Already, average manpower costs for the Army have increased from $75,000 per soldier in September 2001 to $120,000 per soldier today. This 60 percent increase reflects the higher salaries, benefits, retention and recruiting bonuses being employed to maintain the size of the existing force. Retention bonuses have increased almost tenfold, from $75 million to $835 million in the Army’s budget during the current war. To preserve manning levels, the Army has improved its recruiting force and added new tools to attract the necessary trainees, but force quality has diminished. Only 79 percent of the recruited pool had completed high school, and the Army has granted three times more moral waivers and accepted six times the level of Category IV recruits than it did before Operation Iraqi Freedom. Thus, we are paying a lot more for a lower quality input.

Between now and 2012, the Army and Marine Corps will strive to attain their higher authorized strength levels. Some of this ramp-up will be achieved by keeping a large percentage of the existing force, those already trained and experienced warriors. The rest of the increase will be attained by recruiting a larger number of new soldiers and Marines, in the midst of an era of persistent conflict. The mix of additional, more-seasoned troops and a larger number of recruits will further increase the average annual cost of an enlisted man — by my calculations, an additional 33 percent, to at least $160,000. This is more than double what we were budgeting in 2001.

That increase is under favorable conditions. Given that manpower costs increased by 60 percent just to preserve today’s end strength, it may be unreasonable to increase the ground forces by nearly 100,000 and not expect higher cost growth. Under a more drastic scenario, one in which the U.S. economy expands while the war slogs on, the contest to attract and retain more of America’s teenagers could peak at $200,000 per enlisted member. At these prices, without substantial increases to the Pentagon’s budget ceiling, modernization funding will be very crimped, and not just for the nation’s land forces.

THE WHOLE PROBLEM Writing in The Washington Quarterly, Princeton’s Aaron Friedberg observed that, “The U.S. government has lost the capacity to conduct serious, sustained national strategic planning. Although offices and bureaus scattered throughout the executive branch perform parts of this task for their respective agencies, no one place brings all the pieces together and integrates them into anything resembling a coherent, comprehensive whole.”

In a world in which U.S. strategy must account for a vastly changed security environment and provide a coherent and comprehensive response, this marked inability to think strategically and see the whole rather than just the disparate parts is potentially fatal. We cannot default to Cold War patterns, intellectually or fiscally, to guide us. We need a grasp of the whole problem, which is inherently different than the past.

There is no doubt that the American people can afford to spend whatever is necessary to provide for their security. The past few years have shown that the federal government can extract nearly 6 percent of the country’s total output for fighting wars without significantly affecting our social cohesion or economic status — at least for the short term. But it is not as clear that we can do so forever, or that spending patterns from the Cold War or the Long War represent how the nation should best spend its resources for an era of conflict or stark uncertainty. Other claimants, including homeland security (which includes border security and critical infrastructure protection), science and technology research, as well as the nonmilitary instruments of national power (foreign aid, economic development, public diplomacy and strategic communications) are far more stressed. They, too, require a substantial infusion of resources to increase our competitiveness and secure our interests in the long term.

Mullen has suggested that the entire posture of our military is “out of balance” because of the nature of today’s conflict. But a look at the country’s total budget suggests the problem is much bigger than just the military’s preparedness for conventional vs. irregular wars. A Stanley Foundation policy analysis paper by Cindy Williams of the Massachusetts Institute of Technology notes that our European allies average three times more of their national income on aid to the developing world. These are the same allies we continuously exhort to spend more on military spending. What might be “out of balance” is the proportion of the U.S. national security budget that is dedicated to preventive and constructive efforts. Gates suggested this is in his notable speech. He should be applauded for pointing this out, even if he couldn’t bring himself to the obvious conclusion that we might be better off with shifting resources from defense to our international affairs programs.

Cold War spending patterns do not satisfactorily meet the full range of challenges American policymakers must address in the 21st century. Although 4 percent of GDP appears quite reasonable to me, we should be more interested in hearing how the Pentagon will use those resources wisely. Certainly, we do not need a larger military built on a pre-Sept. 11 model, but that is all that has been offered. We should be equally interested in the return on investment in education, infrastructure and basic research. Should we spend 1 percent of GDP on homeland security? What percentage of GDP should we spend on the State Department and our diplomatic weapons? Is today’s 16-to-1 ratio between military and diplomatic/economic spending the correct balance? The foundation for our long-term security includes these functions, and our declining global competitiveness cannot be regained with new bombers, tanks and submarines.

Perhaps it’s a forlorn hope, but Friedberg’s call for something “resembling a coherent, comprehensive whole” needs to be answered. We need a lot less legerdemain from the Pentagon’s lobbyists, and a lot more intellectual capital and honesty. The time for hard choices will come back to haunt decisions made today that do not account for truly strategic priorities and disciplined requirements, and not just historical patterns and fixed formulas. Thinking strategically always involves choices and tradeoffs and a rigorous evaluation of risk. There is nothing formulaic to it — or at least there should not be.

FRANK HOFFMAN served for more than 24 years as a Marine officer. The views expressed in this article are his own and do not necessarily reflect the views of the Defense Department or any institution with which he is affiliated.