Dollars and Cents
posted by wretchard
The Belmont Club
The paper, US Defense Strategy After Saddam authored by Dr. Michael O'Hanlon of the Army War College's Strategic Studies Institute examines how the War on Terror will affect US military expenditures in the coming years. (Hat tip: MIG)
O'Hanlon, a Senior Fellow at Brookings, makes a number of surprising points in his analysis. The first is that military expenditures will be lower, as a percentage of GNP, than at any time in the past. On page 8 of his paper, O'Hanlon gives the following figures from the Office of Management and Budget.
Decade Percent of GNP
1960s 10.7
1970s 5.9
1980s 5.8
1990s 4.1
2000-2009 (projected) 3.4
However, the size of the military budget in absolute terms will continue to be huge because the American economy itself is so gigantic. O'Hanlon puts it this way:
America’s defense budget is staggeringly high. Depending
on how one estimates the spending of countries such as
China and Russia, U.S. defense spending almost equals
that of the rest of the world combined. In 2002, prior to
additional U.S. budget increases as well as the added
costs of the war in Iraq, American defense spending
equaled that of all the rest of the North Atlantic Treaty
Organization (NATO), Russia, China, and Japan, combined.
That said, judging whether U.S. defense spending is high
or low depends on the measure. Compared with other
countries, it is obviously enormous ... Relative to the
size of the American economy, by contrast, it remains
modest by modern historical standards at about 4 percent
of GDP (half of typical Cold War levels, though nearly
twice the current average of most of its major allies).
Compared with Cold War norms, it is high in inflation-
adjusted or constant dollars, though not astronomically
so.
Although Defense is spending more dollars, it has not
greatly expanded in numbers of personnel. "Still, one
might ask why an active duty military of the same size as
the Clinton administration’s has grown in cost by more
$100 billion a year during the Bush presidency". The
answer is surprising. Examining the 2005 budget request
O'Hanlon found that "even adding up all these pieces,
less than 20 percent of the $100 billion real-dollar
growth in the annual Pentagon budget is due to the direct
effects of the war on terror." Twenty seven percent of
the requested increases were for higher salaries for
military personnel, reflecting the need to retain
personnel who might be lost to the service. Much of the
rest was required to "to restore funding for hardware to
historic norms after a 'procurement holiday' in the
1990s". Most of the pressure comes from "the main combat
systems of the military services, which are generally
wearing out. Living off the fruits of the Reagan military
buildup, the Clinton administration spent an average of
$50 billion a year on equipment, only about 15 percent of
the defense budget in contrast to a historical norm of
about 25 percent. This 'procurement holiday' must end,
and is ending."
However, spending more money on the same number of troops was not enough. The War on Terror required adding men to the ground forces and more money had to be found to support them. The uncertain duration and progress of operations in Iraq and Afghanistan and the possibility of action elsewhere meant that unanticipated expenses might occur. The Congressional Budget Office believed it possible that a 17% real increase in the Defense budget might be necessary to fight the War on Terror, threatening to push the military share of GNP back to its 1990s levels.
<<<
Expectations are for continued annual increases of about $20 billion a year -- roughly twice what is needed to compensate for the effects of inflation (or to put it differently, real budgets are expected to keep rising at about $10 billion a year). By 2009, the annual national security budget would total about $500 billion, in rough numbers -- about $450 billion when expressed in 2005 dollars. Indeed, given the administration’s plans, that is a conservative estimate of what its future defense program would cost the country (not even including any added costs from future military operations or the ongoing missions in Iraq and Afghanistan). The Congressional Budget Office estimates that, to fully fund the Pentagon’s current plans, average annual costs from 2010 through 2020 would exceed $480 billion (in 2005 dollars) and perhaps as much as $530 billion.
>>>
Dollars and cents provide part of the framework in which to examine strategic options. It's all very well to say "there are not enough troops in Iraq" or "we must teach Syria a lesson" or "we must continue to deter North Korea". But in the final analysis, the means to these proposed ends must be provided or the goals themselves adjusted to the resources at hand.
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