Budget crisis looms
The United States Department of Defense (DoD) and military services are facing their most acute planning and budgetary crisis since the fall in defence spending that followed the end of the Cold War. While the military’s internal projections call for continued expansion on top of the large funding increases of the past seven years, the Pentagon is expected to come under pressure – particularly under a new administration – to provide a more detailed strategic justification for the maintenance of current spending levels.
The Pentagon’s defence budget request for fiscal year (FY) 2009 (beginning October 2008) was $515 billion, combined with a $70bn down payment on the costs of military operations in Iraq and Afghanistan and other counter-terrorism activities. When the Department of Energy’s spending on nuclear weapons, reactors and environmental clean up of the nuclear-weapons complex is added, the total brings US defence spending to its highest level, in constant dollar terms, since the end of the Second World War. Moreover, Secretary of Defense Robert Gates has estimated that the Iraq and Afghanistan wars and counter-terror operations could cost yet another $100bn in FY2009, yet to be requested from Congress.
This defence estimate totals $710bn and exceeds all other US federal spending items except social security and medical programmes. However, the Congressional Budget Office (CBO) estimates that existing DoD programmes will be underfunded by at least 20% over the next decade, and the DoD is at work on a budget plan for 2010–15 that would require even greater resources. While the upward trend in DoD spending has seemed inexorable, a number of analysts believe that there is no expressed strategic rationale for it.
Conflicting pressures
The Pentagon faces serious internal pressures to increase funding. To meet these, Chairman of the Joint Chiefs of Staff Admiral Mike Mullen has moved to pre-empt pressure for cuts, calling for the defence budget to be kept at a guaranteed 4% of GDP, roughly equal to the present defence budget plus current spending on Iraq, Afghanistan and counter-terrorism operations. His proposal would thus incorporate the current annual supplemental funding into the regular DoD budget, in effect perpetuating stepped-up funding. Mullen argues that this level of funding is needed because of the stresses caused by the Iraq and Afghanistan operations, the need to ‘reset’ equipment and forces after the wars, a planned increase in the size of US ground forces and the rising costs of new equipment.
Neither Mullen nor Gates, however, have spelt out the strategic rationale and the post-Iraq mission of a larger, more heavily funded military. For this to be done, the Pentagon would need to carry out a detailed, zero-based look at current forces, equipment needs, and operating and support costs. All the main presidential contenders look set to use the 2009 Quadrennial Defense Review as an opportunity for just such an in-depth review. Hillary Clinton, a member of the Senate Armed Services Committee, has supported increasing the size of the force, but has also been critical of excessive and wasteful DoD spending and has proposed a deadline for the US to leave Iraq. Barack Obama has also indicated that he would review defence spending and has called for the rapid withdrawal of forces from Iraq. And John McCain, while a robust supporter of defence, has been a vocal critic of Pentagon spending practices, especially earlier decisions on a new air force tanker, and the earmarking of defence projects that benefit the districts of specific members of Congress. The next president will also face budgetary pressure beyond the realm of defence, with the deficit likely to be exacerbated by the current economic recession. As the Iraq operation winds down, the ‘savings’ from defence will be seen as a potential means to fund much-needed spending on infrastructure, housing, education and especially efforts to reform America’s dysfunctional health-care system. While McCain has been less focused on domestic spending needs, he has concentrated on the health-care problem. Both Clinton and Obama have produced detailed domestic programme goals that will require increased spending on items other than defence.
Internal funding demands
Current trends within the military, if left unchecked, would clearly lead to higher defence budgets. The army and the marines are both growing: under a decision made in 2007, within five years they should have an extra 92,500 recruits on top of their previously legislated combined end-strength ceiling of roughly 670,000 active-duty personnel. This increase is proving difficult to execute, with recruiters accepting more personnel with lower levels of education and knowledge, as well as questionable backgrounds, than at any time since the end of the Vietnam War. Retaining military personnel will necessitate investment in military housing, family services and medical benefits: the DoD already spends more than $30bn a year on health-care programmes. Operational and support costs are also rising. About 60% of the defence budget is accounted for by operational costs, and these have been under-budgeted for decades, with the Pentagon assuming they will stay relatively flat with inflation whereas in fact they tend to rise by about two percentage points more than inflation. The rise in fuel prices has put particular pressure on operational costs. The CBO estimates that an annual growth rate in support costs of 4–6% is likely over the next six years, but the DoD’s budget forecasts do not include such growth. The costs of supporting operations, combined with a growing force needing training, education, exercise, supplies and services will add to the upward pressure on defence budgets.
In addition, the forces will want to repair or replace hardware damaged in Iraq and Afghanistan. This will create greater demand for procurement spending. ‘Reset’ costs have grown to about 25% of supplementary funding requests. The Government Accountability Office (GAO) estimated in April 2008 that the cost of rebuilding the army’s stock of equipment from the wars could be as much as $190bn between 2004 and 2013.
Meanwhile, each of the military services has expensive modernisation programmes intended to deliver the next generation of military vehicles, helicopters, aircraft, missiles, ships and C4ISR (command, control, computers, communications, intelligence, surveillance and reconnaissance) technology. The costs of these programmes have become unpredictable. In a separate study, the GAO said the expected cost of significant Pentagon hardware programmes had risen from $790bn in 2000 to $1.6 trillion in 2007. Meanwhile, the average schedule delay for putting in place the initial capability of these programmes had grown from 16 months to 21 months. According to the GAO, the ‘DoD’s planned investment for new weapon systems now reflects the highest funding levels in two decades, with no significant decline expected in the near term’. Examples of cost escalation are not hard to find. In 1992, the plan was to buy 648 F-22 Raptor fighter aircraft for $81bn. By 2004, the programme had shrunk to 181 aircraft at a planned cost of $65bn, representing a much higher unit cost. The air force was instructed to terminate the F-22 programme in the FY2008 budget, but the new budget request for FY2009 leaves open a possible decision to continue production. Projected costs for the F-35 Joint Strike Fighter have risen from a $203bn estimate for 2,866 aircraft for the US in October 2001 to $240bn for 2,458 aircraft as of December 2006. The cost of the navy’s new littoral combat ship rose sharply from $213m per ship in 2006 to an estimated $275m in 2007. The army’s Future Combat System, intended as a family of vehicles and equipment to be linked by a wireless network of radios and satellites, is estimated by the army to cost $161bn, although the GAO estimate is as high as $234bn. This new generation of equipment will put upward pressure on future defence budgets. The next administration seems bound to look at equipment priorities more closely.
Budget laxity
The looming budget pressures are similar to those the Pentagon was facing in 2001, before the 11 September terrorist attacks on New York and Washington. After that date, however, the defence budget was not constrained by other fiscal pressures, and overall defence resources, including those for the wars, have since more than doubled. The DoD has been able to fund both its basic budget and the conflicts, with no need to prioritise between the two.
This loss of normal budget discipline has undermined the DoD’s decision-making machinery. War costs now amount to over $700bn and are estimated to reach at least $1 trillion, and perhaps as much as $2 trillion, once the costs of medical care for veterans are included. These have been paid for largely through emergency supplemental budget requests, which are processed within the DoD and in Congress on a faster track from that of the normal annual budget. The supplemental requests have included funding for programmes not normally considered war expenditures, such as fighter aircraft and the costs of creating ‘modular’ army brigades. The erosion of normal budget processes at the DoD and in Congress has been striking over the past seven years. This laxity could soon come to an end, however, unless the next administration provides a longer-term rationale for further supplementary requests.
The military’s modern role
While the challenge for the next administration will be to provide a strategic rationale for the defence budget over the coming years, the Pentagon is currently carrying out a full programme and budget review, intended to lead to major budget decisions covering the next six years. The parameters of this review are not clear. The White House budget office exempted the DoD from its guidance to all federal agencies to refrain from major budget and programme planning for the next budget, partly because of the DoD’s two-year budget-planning cycle, but perhaps also to present the next administration with a budget that for political reasons it could not cut. Whatever the short-term outcome, the DoD will need in a broader review to provide greater vision and detail about the long-term strategy and missions of the military than it has to date. Questions going to the heart of defence planning would need to be addressed, leading to a determination about whether such a large and expensive military can be justified. These questions would include: how central are counter-terrorism, counter-insurgency, and post-conflict stabilisation and reconstruction missions to the future of defence planning? What is the nature of the threat and what is the correct role of the military, as opposed to other tools of statecraft, to cope with it? What is the US strategy for dealing with the broader issue of failed and fragile states, and what is the proper role for military forces in coping with that challenge? To what extent should forces be shaped around potential future challenges from a resurgent Russia, a rising China, and regional powers such as Iran? What assets does the military bring to bear in dealing with other challenges to the international system, such as global poverty, governance, health, international crime, proliferation and climate change?
While none of these strategic issues has an obvious answer, it is not clear that the next administration will see the military as the most useful tool for dealing with every challenge. Other means of engagement – diplomacy, foreign assistance, reconstruction support, trade and economic policy may receive greater attention and resources from a future administration. All three current presidential contenders have suggested they might give such tools greater priority than in the recent past. For all these reasons, the future of the defence budget is much less predictable than the Pentagon might prefer.
